According to analysts from Rabobank, the expectations about no change from the Bank of Japan in the near-term, leaves safe haven demand as the critical driver in JPY.
“On the assumption that it remains premature to seriously consider a change to BoJ policy, it remains likely that the JPY will be driven by the ebb and flow of safe haven demand. USD/JPY has crept back above the 110.00 level in European hours today in a reflection of recovering risk appetite. Most likely investors in the Asian timeframe are more sensitive to the news regarding coronavirus given their geographical proximity.
“At levels above USD/JPY110, the FX market would appear to be demonstrating that levels of risk appetite are relatively firm. Aside from the coronavirus, other threats which could support the JPY in the coming months would be another round of trade tension between the US and China (which we anticipate once the phase 2 trade deal talks commence) or a bout of soft global growth data.”
“We see scope for USD/JPY trading lower in the 108.00 area on a 3 month view.”