BNP Paribas: USD/JPY Heading to 84.95
July 20, 2010 at 10:44 UTC || By Forex Playmaker
The US dollar may trade at an eight-month low against the Japanese yen, as concerns of a faltering US economy mount, according to BNP Paribas.
Hans-Guenter Redeker, head of global currency strategy at the firm, notes that Japan has been pulling money out of the Treasury market at the fastest pace in two years, as yields on US 2-years trade near records lows.
Mr. Redeker adds, “Over the past month, most of the major U.S. data releases have disappointed. Lower yields are “likely deterring the traditional foreign investors (especially Japan) for the time being, suggesting dollar-yen will remain under pressure.”
The USD/JPY is last trading at 87.00. On Friday, the pair traded at 86.25, representing the lowest level since December 2009.
Mr. Redeker’s forecast is in line with the longer-term downtrend for the USD/JPY. However, his target may prove conservative. As I have noted over the past several months, the US economy is showing signs of an economic contraction going forward.
Should the U.S. economy slip back into a recessionary (or deflationary) cycle, if it hasn’t already, the USD/JPY could easily trade down to the 82.50 level and possibly lower.
