Citibank commented on the USD/JPY pair, drawing similarities with the currency’s historical movements and predicting possible future trends. The financial services firm noted that although the USD/JPY upside was more restrictive than initially expected, the pair is unlikely to fall below 140 yen/USD until next year.
Citibank expects a possible rebound to between 151 yen and 155 yen before any significant decline.
The company’s analysis indicates that the company’s analysis indicates that USD/JPY proactively took into account the shrinking of the interest rate spread to around 4%. The company expects the next significant depreciation of the pair to occur after the actual interest rate spread between the US and Japan narrows to clearly below 4%, a scenario that the company believes could unfold over the next six months. Looking ahead, Citibank’s forecast for USDJPY is below ¥140 in 2025, JPY/USD 130 in 2026 and JPY/USD 120 in 2027.
Citibank also noted the sharp decline experienced by the USD/JPY pair during the 1998 LTCM crisis as a historical precedent, noting the significant decline in the currency pair after periods of upside driven by the JPY transfer trade in 1998 and 2007. The company notes that USDJPY could face a similar risk of a 30%-40% correction within a few years or even months, as has been observed in the past.
The commentary highlighted that historically, USD/JPY rose when the interest rate spread exceeded 4.75% and tended to fall when the spread was below this limit. Citi noted that the current wide spread in interest rates and high interest rates/volatility could lead to a temporary return to JPY trading against the yen.
Read also:Dollar Holds Above 13-Month Low
This article was translated with the help of an artificial intelligence program after an editor’s review. For more details please refer to Banha Terms and Conditions
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