Bloomberg: the worst for the yen is over, with the dollar moving down from its peak

18 November 2022 202
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Source: Bloomberg

Authors: Chikako Mogi and Takako Taniguchi

Article: Original article

Date of publication: Friday, November 18, 2022


Jason Thomas, head of global research at Carlyle Group Inc. said that the worst for the yen seems to be over, suggesting the dollar has already peaked with the Fed’s rate hikes being slower.


The Fed is likely to raise interest rates by 50 basis points in December. Then, the regulator is eager to carry out a couple more hikes prior to pausing in March. The yen might strengthen further above 130 against the dollar, or even get closer to 125 in the coming year.


The comments came as investors disagreed on whether the dollar had passed its peak, given that other currencies have rebounded against it over the past few weeks as U.S. inflation shows signs of slowing.


Investors, setting up for a strong dollar with leveraged rates, are poised to close positions as the Fed's tightening cycle comes to an end. These factors would lead to major reversal adjustments. Currencies may be moving the other way at a fast pace. So, this is a realistic potential for the first quarter of 2023.


However, a 50-basis-point rate hike in December, accompanied by the Fed’s hawkish comments, is likely to push the yen above its three-decade low of 151.95 against the dollar. As reported by Jason Thomas, the Japanese currency is expected to strengthen then, following the regulator’s policy. 


Japanese households, financial institutions and businesses are also coming to realize that their foreign asset values are priced way too high compared to domestic ones. This would lead to having a repatriation and supporting the yen. 


In fact, there are more pros than cons for the currency, as the expert noted.

 

Forecast: USDJPY is likely to decline in the medium-term outlook

This content is for informational purposes only and is not intended to be investing advice.

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