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The Japanese currency, paired with the market leader US dollar, does not feel very confident. The yen showed some growth this week, however, there were no significant shifts in the USD/JPY pair. Many experts expect the greenback to strengthen against the yen.
According to analysts, an increase in Treasury bond yields stimulates demand for US government debt from Japanese investors. On Wednesday, November 13, bond yields, which showed volatility, slightly stabilized and raised the yen. Note that earlier the Japanese currency strengthened due to a surge in the yield of long bonds of Japan
The US currency, unlike the Japanese, feels great. Most analysts agree that the greenback will strengthen its position both in the short and long term. The pep was boosted by a speech by Fed Chairman Jerome Powell. According to the Fed chief, the US economy is on the rise for the eleventh consecutive year, and the unemployment rate in the United States is at a half-century low, which cannot but inspire optimism. The greenback uses this, not missing the opportunity for growth.
The only risks to the US economy, according to J. Powell, are the low growth rates of the global economy and an impressive level of public debt. At the statements of the head of the regulator, the dollar strengthened against leading world currencies, including the yen.
The strengthening of the greenback in relation to the "yen is also predicted in the large investment company Nissay Asset Management. The company's currency strategists are confident that at the beginning of next year, namely in March – April, the USD exchange rate will reach 112 yen per one unit of American currency.
Nissay Asset Management experts consider the main reason for this sharp rise to be a slowdown in the reduction of interest rates. Recall, the Fed recently decided to take a break in the process of lowering the key rate, and analysts find it difficult to answer how long it will last.
Experts believe that the increase in the yield of treasury bonds is another important reason for the strengthening of the greenback in relation to the yen. They act as catalysts for demand for US public debt from Japanese investors. According to preliminary estimates, when the yield on 10-year US bonds approaches 2% per annum, Japanese traders will increase demand for this asset. At the moment, the yield on 10-year bonds is 1.916% per annum and has continued to increase steadily since mid-October 2019. It is possible that investors in Japan will buy treasuries with less hedging of currency risk. These processes actively stimulate the strengthening of the US currency, experts emphasize.
Currently, the USD/JPY pair is demonstrating stability. The pair was near the level of 108.75 on Thursday morning, November 14. Strong volatility was not observed.
After a while, the USD/JPY pair allowed themselves to slide to extremely low levels. At the moment, the pair is trading within the range of 108.65-108.66, causing concern for investors who counted on long-term stability.
Nissay Asset Management believes that in the near future the USD/JPY pair will run in the range of 107–110 yen per US dollar. Experts say that support between levels 107 and 108 will be quite powerful. At the same time, analysts admit that the pair may not have enough drivers to grow to 115 yen per 1 unit of the US currency.
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