The global pressure for higher yields and the global energy crunch have weighed heavy on the yen with USD/JPY reaching the highest level since 2002. However, economists at Danske Bank expect the USD/JPY pair to move downward in the medium-term as inflation eases.

Energy crunch to weigh on the yen

“In the short run, the global pressure for higher yields and the global energy crunch will keep weighing on JPY.” 

“Looking further ahead, we do expect the pressure on JPY will wear off when inflation shows signs of peaking and we see Tokyo capping the upside on USD/JPY.”

“We forecast the cross at 129 in 1M, 129 in 3M, 126 in 6M and 122 in 12M.”