USD/JPY set to decline toward 128 over next quarter – Rabobank

USD/JPY continues to trade in a relatively tight range above 130.00 as market participants try to figure out how the Bank of Japan's (BoJ) monetary policy will be shaped when the new governor takes over. Economists at Rabobank see the pair at 128 on a three-month view.

There is likely scope for some change in BoJ policy in the coming months

“In the next few weeks, PM Kishida will nominate the next BoJ governor. This may bring its own set of surprises insofar as there is a possibility that speculators may have to accept that the outlook of the new governor may not be drastically different from the old. In our view, there is likely scope for some change in BoJ policy in the coming months. However, this may not be substantial.”

“On the assumption that the BoJ’s yield curve control policy is tweaked in the spring, we are forecasting USD/JPY at 128 on a three-month view but expect volatility around the March policy meeting given the risks that policy is again left unchanged.”