FXStreet (Delhi) – Research Team at RBC Capital Markets, suggests that they like USD/JPY higher in 2016, both because it is the key play on the underlying driver of USD gains (higher yields) and because it could continue to rally, even if US yields don’t rise further.
Key Quotes
“By raising the cost of hedging foreign assets, higher US rates have the potential to change the behaviour of domestic private investors in Japan in a way BoJ policy has not. This should bring a whole new layer of JPY selling in 2016. Even absent this, however, the public sector outflows are ongoing and overseas investors are out of their USD/JPY longs and have the potential to reinforce any move to the topside as they cover shorts/re-establish longs.”
(Market News Provided by FXstreet)