The yen will probably weaken further as Prime Minister Shinzo Abe’s fight to revive Japan’s economy sparks gains in the country’s stocks, according to Ray Attrill, the Sydney-based global co-head of foreign-exchange strategy at National Australia Bank Ltd. (NAB) He spoke in an interview with Susan Li on Bloomberg Television.
On the yen:
“Dollar-yen is an extremely sharp toy at the moment as you’ve seen from the volatility over the last week or so.
‘‘If the U.S. yield backdrop is supportive, we will see these moves higher. There’s obviously a fair amount of disappointment at the substance of Abe’s so-called third arrow speech last week.
‘‘I suspect we have to wait until after the July upper house elections before we see more flesh being put on the skeleton of that speech. That may be something that encourages the Nikkei to have a fresh move higher. And given that the Japanese stock market and the yen have been moving hand-in-hand in opposite directions, if we breathe more life back into the equity market rally in the coming weeks and months, that may be what pushes dollar-yen back up above 100.
‘‘We’re forecasting 105 for the end of the year.’’
On the Australian dollar, which traded at 94.48 U.S. cents as of 1:33 p.m. in Tokyo and yesterday reached 93.26, the lowest since September 2010:
‘‘We’ve got the currency at around 90 in the middle of next year and 87 by the year end. The foreign-exchange markets being what they are, the risks are that we’ll see those levels sooner rather than later. I still think in the scheme of things, it’s still going to be a U.S. dollar strength story. We’ve seen U.S. yields breaking higher again in real, not just in nominal terms. And I think that’s really important for the broad dollar trend.
‘‘If that trend continues, it is going to drive the U.S. dollar stronger and the Australian dollar is going to be one of the main victims, along with this liquidation of emerging market bond and currency positions that we’re seeing. So that’s the backdrop that I think is not going to go away anytime soon.”
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