USD/JPY to trade at 145 in the end of the year - Rabobank

US President Trump is clearly far too busy to be an avid BoJ watcher. His comments that Japan and China are putting the US at an unfair disadvantage when they weaken their currencies suggests he may have missed the fact that the rounds of intervention implemented by the MoF since 2022 have been aimed at strengthening the JPY, Rabobank's FX analyst Jane Foley notes.

Downside risk to persist to the end of the year

"That said, Trump has a point because the JPY is undervalued against the USD, and indeed against most other G10 currencies, on many measures. The last few years saw a keen interest in the JPY carry trade as widened interest rate differentials drove speculators into short JPY positions vs the USD. This, however, has been changing. The BoJ is currently the only G10 central bank maintaining a tightening policy bias and, in reflection of this, the JPY is the best performing G10 currency in the year to date."

"Recently, a round of better-than-expected Japanese economic data has spurred the view that BoJ policy makers are preparing the ground for another rate hike, potentially around the middle of the year.  This has fuelled interest in the JPY. The problem, however, is that this trade has become crowded. In a sharp reversal from last year's holdings of net short JPY positions, latest CFTC speculators' data suggest that the level of net JPY longs has reached the highest level ever."

"In these circumstances, a round of profit-taking wouldn't be surprising as the market awaits fresh incentive to renew its JPY longs. The JPY rally did stutter in the last few sessions. However, it would appear that Trump's comments have provided the incentive to renew interest in JPY longs. We maintain a year end forecast of USD/JPY145, with downside risk."