We continue to expect the BoJ’s aggressive policy to continue to drive USDJPY higher, towards 105 in three months and 120 in twelve months. The latest portfolio flow data showed two consecutive weeks of outflows from Japan, and while this, in our view, probably reflected the Golden Week period rather than early changes to allocation, we continue to expect large portfolio rebalancing effect towards foreign assets to weigh on the JPY. The strong central bank policy backing for this move as well as the possibility part of the outflows go to AUD suggests to us JPY also falls vs. AUD in this environment.
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Credit Suisse