JPY to outperform on the crosses – especially against the euro – ING

This is not a broad-based decline but is largely led by developments in Japan, ING’s FX analysts Chris Turner notes.

A sizable USD/JPY move sub-150 on its way

"Here, local investors seem impressed that there has been little official push-back against the recent rise in JGB yields and that the Bank Of Japan may hike again this summer. The OIS market prices 21bp of a 25bp hike in July – which would take the policy rate to 0.75%."

"We have been surprised by the yen's strength in response to these relatively modest moves in Japanese interest rates. And we do note that speculative positioning is now quite long for the yen. However, we don't want to stand in the way of further short-term term USD/JPY losses, because tomorrow's January Japan CPI release could trigger another leg lower."

"That said, we are not looking for a sizable USD/JPY move sub-150 and instead prefer yen out-performance on the crosses – especially against the euro."