According to analysts at ING, the recent rally of USD/JPY was largely anticipated due to the Bank of Japan’s expected rate hike. However, they predict a downward trend for the currency pair in the foreseeable future.
The primary driving force behind this forecast is the interest rate disparity between Japan and many other major central banks globally. In a low-volatility environment, the Yen is expected to remain a popular choice for funding purposes.
As per ING’s projections, USD/JPY is expected to hover around the range of 150.00-152.00, given the stability of short-term US interest rates. However, they anticipate a decline to around 145.00 when US rates begin to decrease over the next few months. By the end of the year, with the Federal Reserve expected to implement substantial cuts totaling 125 basis points, they foresee USD/JPY potentially reaching close to 140.00.
In essence, the outlook for USD/JPY is predominantly influenced by the dynamics of the US Dollar and the trajectory of interest rates set by the Federal Reserve.