23 Dec 2013
Flash: Yen at risk of mean reversion in 2014 - JPMorgan
FXstreet.com (Bali) - JPY has high risk of mean reversion over the next year because positioning is so stretched (shorts more than 3-sigmas from average), notes John Normand, FX Strategist at JP Morgan.
Key Quotes
"Other currencies are at most 1-sigma from the norm. This extreme positioning is why we have flagged USD/JPY as vulnerable to a correction in Q2 (target 100) if the economy fails to reaccelerate quickly from a contraction induced by the consumption tax hike."
"In the interim, however, we go with the policy momentum driving this move – the Nikkei strength in early 2014 which retail Japan's move into NISAs should drive, and the upgrade in US rates at the short and long end as the US economy accelerates and challenges the Fed's view that inflation can stay this low for this long."
Key Quotes
"Other currencies are at most 1-sigma from the norm. This extreme positioning is why we have flagged USD/JPY as vulnerable to a correction in Q2 (target 100) if the economy fails to reaccelerate quickly from a contraction induced by the consumption tax hike."
"In the interim, however, we go with the policy momentum driving this move – the Nikkei strength in early 2014 which retail Japan's move into NISAs should drive, and the upgrade in US rates at the short and long end as the US economy accelerates and challenges the Fed's view that inflation can stay this low for this long."