Analysts at MUFG have accepted that the the yen is not about to skyrocket higher just yet.
MUFG say USD/JPY will find support from “the return to carry”. The carry trade has never really gone away. Yesterday yields on 2 year JGBs dipped back under zero %. Yep, carry is not dead yet.
On the Bank of Japan, MUFG says the risk of tightening to being long USD/JPY “looks limited for now. “
- The escalation of geopolitical risks could also help support USD/JPY.
- Higher crude oil prices are a Yen negative while increased global inflation risks may leave the Fed a little reluctant to push a dovish narrative, at least over the short-term as inflation risks could be seen to be rising.
Mitsubishi UFJ Financial Group is the world’s second-largest bank holding company and second-largest public company in Japan.
This article was written by Eamonn Sheridan at www.forexlive.com. Source