UBS Lowers Forecasts for USD/JPY, Anticipates BoJ Rate Hike
UBS, a leading financial institution, has adjusted its forecasts for the USD/JPY currency pair, lowering expectations to 145 for both end-2025 and end-2026. This revision comes as the Bank of Japan (BoJ) demonstrates increasing confidence in implementing further rate hikes. UBS economists are anticipating a 25 basis-point hike during the upcoming December 19 policy meeting, driving the adjustment in their outlook.
Key Factors Driving the Adjustment:
– Growing confidence in BoJ’s ability to hike rates further
– Recent outperformance of the yen against the dollar
– Alignment with UBS’s broader FX trading views
UBS remains bearish on the USD, expecting it to decline to 151 by the end of 2025 and to 145 by the following year. Despite recent stability in the broader G10 FX market and the USD trading near mid-November highs, potential risks loom on the horizon.
Challenges and Risks in the FX Market:
– President-elect Donald Trump’s tariff-related announcements
– Political uncertainty in Europe, including a no-confidence vote against the French government
– Weaker growth backdrop and dovish ECB repricing
UBS analysts caution that market sentiment may be “short-lived” in the face of these challenges. They foresee a possible larger and more sustained impact, particularly with the weaker growth backdrop and dovish ECB stance. This situation supports their end-2025 target of 1.04 for the euro.
Analysis:
The adjustments in UBS’s forecasts for the USD/JPY and broader FX market reflect the evolving landscape of global economics and geopolitics. As investors, understanding these shifts is crucial for making informed decisions about currency trading and overall investment strategies.
For individuals without a background in finance, this information highlights the interconnected nature of global markets and how events in one region can have ripple effects across the world. It underscores the importance of staying informed about economic trends and political developments to protect and grow one’s financial assets in an increasingly volatile market environment.