The JPY has been in demand of late, mainly on the back of rising global risk aversion. However, as we do not expect risk aversion to rise more considerably, we advise against buying the JPY around the current levels.
Risk sentiment has been deteriorating on the back of falling global growth expectations, which may start to become more supported on the back of moderating Fed monetary policy expectations.
Falling US inflation expectations as well as more muted external demand expectations should prove supportive to a more cautious stance by the Fed.
All of the above should favour carry crosses such as AUD/JPY in the weeks to come. When it comes to USD/JPY, however, additional downside risk cannot be excluded.
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Published On Fri, Oct 17 2014, 05:02 GMT