USD/JPY Monthly Fundamental Forecast February 2013

Outlook and Recommendation

The USD/JPY eased a bit from its high of 91.41 to close the month at 90.91 The pair ranged from low of 89.18 gaining 4.96% this month. A new government and new expectations for the BoJ combined with an aggressive shift in sentiment has seen a violent re-pricing of the JPY, which has lost 15% since November. Sentiment is clearly bearish. To date international rhetoric has been contained but as the JPY weakens there is rising risk that there is a coordinated verbal response. The USDJPY technical trend is strong. The combined effect of JPY correction (factored in our new forecast) and only gradual CNY appreciation may fuel the risk of competitive currency alignments within developing Asia.

The yen will weaken by the middle of this year to about 100 to the dollar, while the Nikkei 225 average will reach about 13,000, according to Shun Maruyama, chief equity strategist at BNP Paribas SA. The yen will end 2013 at 91 to the dollar, according to the average estimate compiled by Bloomberg. USDJPY has reached a new high and trend remains strong; technicals signals produced yesterday that provided a warning that upward momentum was fading have eased with several studies turning back into buy territory. News that BoJ Governor Shirakawa will attend BIS meetings this weekend provides some two‐way risk. It is expected that PM Abe will release his list of preferred BoJ Governor candidates later this month, which is also a major USDJPY risk. The impact of USDJPY on corporate is significant, particularly as it relates to profitability going forward. Panasonic’s suggested that their Q4 forecast is based on a conservative USDJPY at 85. Finally, Bloomberg is reporting that Moody’s has commented   that new stimulus is likely to prove only temporary and that the country’s debt trajectory is likely to rise.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Central Bank Name –The Bank of Japan

Date of next meeting or last meeting: February 14, 2013

Current Rate: 0.10%

Economic events for the month of February affecting AUD, JPY, NZD and USD