Bloomberg News

Yen May Rally Beyond 70 Per Dollar in 2012, JPMorgan Chase Says

November 29, 2011

Nov. 22 (Bloomberg) -- The yen may rally through 70 per dollar next year as global financial stability in the second half damps investor appetite for the greenback, according to JPMorgan Chase & Co.

Japan’s currency appreciated to 75.35 on Oct. 31, its highest level since World War II. The yen will strengthen further in the last six months of 2012 as the global economy stabilizes, driving investors to shun the dollar in favor of Japan’s currency, strategists led by Tohru Sasaki, head of Japan rates and foreign-exchange research at JPMorgan in Tokyo, wrote in a report today.

“Risk sentiment will improve towards the second half of 2012 as the global economy recovers and the European fiscal problem moves towards a resolution,” Sasaki wrote. “We expect broad U.S. dollar weakness with an improvement in investors’ sentiment. In this setting, dollar-yen is likely to trend lower, led by U.S. dollar weakness.”

The currency pair will trade in a range in the first half of the year as a recession in Europe and sluggish growth elsewhere drive investors to buy the safest assets. The yen will reach 72 per dollar during the year and may appreciate through 70, Sasaki wrote. He couldn’t immediately be reached for comment when contacted by telephone.

The yen dropped 0.1 percent to 76.96 per dollar at 1:40 New York time. It has appreciated 5.3 percent so far this year in the best performance against the greenback among the most-traded currencies tracked by Bloomberg.

Japan Intervention

Investors won’t be deterred by the prospect of Bank of Japan intervention, Sasaki wrote. While the central bank has sold yen in the foreign-exchange market to weaken the currency four times in the past 14 months, the action will continue to be sporadic and won’t take a permanent nature, according to Sasaki.

“Although we cannot rule out the possibility of yen-selling intervention when the pace of decline in dollar-yen is rapid, any intervention would probably be of only unilateral, one-off nature,” he wrote. “Therefore, it is unlikely to have a lasting impact on the underlying trend in yen.”

The Swiss National Bank imposed a ceiling on the franc at 1.20 per euro in September to curb the currency’s appreciation. The Bank of Japan likely won’t engage in such action, according to Sasaki.

--Editors: Kenneth Pringle, Dennis Fitzgerald

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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