– USDJPY – a breather before new highs
USDJPY has been consolidating but the dip below 99.00 proved to be relatively short-lived and we still believe that the test of 100 is in the cards over the coming days. JPY crosses continue to perform strongly with EURJPY testing 130 for the first time since early 2010, while the AUDJPY is over 104.00 and now within reach of the pre-crisis 2007 peak of 107.85. Today’s FOMC minutes for March (like January and December) should sound less dovish, which would be positive for USDJPY, but we would still view them as being outdated after payrolls. Bottom line is that the BoJ has moved to the forefront of global monetary easing with a 10% of GDP annual pace of bond purchases, thus doing much of the heavy lifting to support global markets and risk appetites. Although JPY’s weakness against the USD is likely to be somewhat tempered by the Fed’s commitment to full-scale QE3 (we see both USD and JPY as attractive funding currencies), we expect significant further weakness of the JPY against EUR, AUD, NZD and CAD.
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BNP Paribas