FX Weekly Report

The turmoil in emerging markets has led to Japanese yen appreciation especially given its perceived safe haven status. With USD/JPY now close to a key support area near the 100.00 psychological threshold, we might be close to a price zone where we could see a new phase of strength in USD/JPY, as we continue to believe that divergent paths in the monetary policy between the US and Japan represent a powerful long-term support for USD/JPY. Indeed, while the Fed is likely to gradually reduce its

liquidity injections throughout the year, despite recent disappointing nonfarm payrolls figures, while the Bank of Japan is expected to increase its monetary stimulus (either by easing further or by easing longer). Furthermore, as we see too much negative sentiment about emerging markets (see pages 3), the flight to safety into yen is likely to recede in the near future.