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Yen Awakening: Intervention Risks and Real Rates Signal Structural Turn
Abstract：The Japanese Yen is staging a structural recovery as market focus shifts from nominal yield differentials to real interest rates, with major banks targeting a 145 valuation amid heightened intervention risks.
The Japanese Yen (JPY) is undergoing a structural repricing. Analysts at UBS and Morgan Stanley suggest weakness is ending, targeting a fair value of 145 against the Dollar.
The Shift from Nominal to Real Rates
A key strategic note from UBS highlights a breakdown in the USD/JPY correlation with nominal yields. With Japan's inflation expected to cool to 1.5%, real interest rates are projected to rise, providing support.
- Fair value based on real rate differentials estimates: 155
- Inflation forecast by mid-year: 1.5%
Intervention Watch & Flow Dynamics
Market volatility remains high as GBP/JPY slipped 0.95% and USD/JPY faced resistance near 158 amid fears of “window guidance” and coordinated action.
- Official Action: US and Japan have opened consultations on exchange rates.
- Capital Repatriation: Sumitomo Mitsui is increasing purchases of JGBs.
Technicals
- USD/JPY faces critical support at the 154 integer level.
Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
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