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Hardy: Dollar Yen - to 120 and beyond

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The big move we've seen in USDJPY is far from over according to Head of FX Strategy John Hardy. It's a tale of two opposites for policy makers in Japan and the United States at the moment. While the Federal Reserve continues to hint at the likelihood of instituting a rate hike next year, Japan’s Prime Minister Shinzo Abe is moving forward with his plan to delay a scheduled tax hike by 18 months. The Japanese economy slipped into a technical recession early in the week after a 1.6 percent contraction in the third-quarter, largely caused by the previous sales tax increase which crippled consumer spending.
John Hardy, Saxo Bank’s Head of FX Strategy, believes that the dollar’s strength against the yen is set to continue throughout the remainder of 2014. With investors currently targeting 120.00 for USDJPY, John says that the yen may fall to USD 130.00. The yen hit a seven year low against the dollar at USD 118.98 on Thursday, the lowest level seen since August 2007. Even the struggling euro managed to reach a six-year high against the yen at EUR 149.12.
The revival story of the US economy was accelerated by the Bank of Japan’s surprising decision to escalate its stimulus programme in October. The minutes released by the Federal Reserve after Wednesday's meeting did express slight concern over the weakening global economy and the stimulus programmes enacted in Europe and Asia. Both European and Asian markets are expected to intensify stimulus spending in the New Year to spur growth.