MUFG Sees USD/JPY Plummeting Towards 152 as Yen Rally Accelerates
The USD/JPY exchange rate has seen a significant decline in recent days, dropping below MUFG's end-Q4 forecast of 156. The pair fell to its lowest level for a month at 155.31 before rebounding to around 156.3 on Friday.
MUFG forecasts the USD/JPY rate will continue to fall towards 152 by Q2 2027, with a projected trading range falling from 155-165 in September to 149-159 by the second quarter of next year.
The bank attributes this decline to Japan's trade deficit and stable oil prices, as well as the prospect of further BOJ rate hikes. MUFG notes that joint Japanese and US action has made traders more cautious about rebuilding short-Yen positions, citing JPY15.4tn in FX intervention since the end of July.
The bank also believes the BOJ could respond if renewed Federal Reserve tightening placed the Yen under fresh pressure. A softer US rate outlook remains a crucial part of MUFG's case, with weak US employment data potentially reinforcing the decline towards 154 and eventually 152.