FX Daily: Low yielders set to remain under pressure
At a Glance
The desk observes ongoing weakness in defensive currencies, specifically the Japanese yen and Swiss franc, as higher energy prices and maintained interest rates persist. Per the full note , the USD/JPY and USD/CHF pairs are forecasted to remain supported amidst a resilient equity market driven by optimism surrounding AI investments. With broad expectations that the BoJ and SNB will not adjust monetary policy aggressively, traders are increasingly likely to favor higher-yielding currencies like the dollar and krone.
Key Takeaways
Full Analysis
What the desk is arguing
The desk posits that low-yielding currencies such as the JPY and CHF will remain under pressure due to heightened energy prices and a lack of aggressive central bank action. Furthermore, the Japanese yen remains particularly vulnerable as USD/JPY may continue to trend towards the 164/165 area ahead of the upcoming BoJ meeting on July 31. This aligns with the prevailing risk-on sentiment in global markets.
Supporting this, the commentary notes that demand for USD/JPY and USD/CHF is expected as investors seek currencies that offer yield amidst rising energy prices. Currently, traders are gravitating towards the dollar and Norwegian krone, positioning themselves away from the defensive low-yielding currencies exemplified by the JPY and CHF.
Where it sits in our coverage
Our consensus target for USD/JPY is currently 149.00 for December 2026, with a range of firm targets showing variability: goldman at 165.00, citi at 163.00, and jpmorgan at 164.00.
This viewpoint of a sustained bearish trend on low-yielders matches well with the overall cross-firm sentiment. Notably, our consensus aligns at the lower end of the firm spread for USD/JPY, highlighting expectations of softening demand for the JPY in the medium term.
How other firms see it
Firms aligned with this bearish view on low-yielders include goldman and citi, both projecting a weaker JPY future. In contrast, bofa expresses a slightly more optimistic stance with targets close to the lower bounds of our consensus.
It is pertinent to watch how the USD/CHF trajectory may correlate with SNB policy expectations. Alongside the influences in USD/JPY, these currencies are increasingly interlinked through their shared themes of low yield and central bank caution.
Market Implications
Traders should monitor the USD/JPY level around 165, as a breakthrough could reinforce bullish momentum. Additionally, keep an eye on BoJ commentary before their July 31 policy meeting, which might catalyze further moves in these currencies.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Rabobank | Bearish | 1.1000 |
ING | Bullish | 1.1300 |
MUFG | Neutral | 1.1200 |
From the original
Articles FX Daily: Low yielders set to remain under pressure Published 07:47 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The defensive currencies – the Japanese yen and the Swiss franc – remain soft. That may be because equity markets remain re
Related speeches
4 itemsFX Daily: Defensive rotation in play
The desk interprets current market dynamics as pointing toward a defensive rotation in the FX space, particularly into safe-haven currencies such as the Swiss franc and Japanese yen. This rotation appears influenced by higher energy prices not correlating with perpetually rising interest rates, indicating investor concern about economic growth rather than inflation. Per the full note from ing, as investor sentiment turns cautious ahead of the US midterms, we could see strengthening in defensive currency plays alongside a potential decline in tech sector allocations. The immediate consensus target for the EUR/USD remains around 1.16, suggesting traders still have a mildly bullish outlook despite recent volatility.
FX Daily: Dollar has lost its safe-haven crown
The desk interprets the recent shift in safe-haven demand as a significant blow to the dollar's traditional status, with the yen and Swiss franc gaining favor amidst heightened global risk aversion, particularly concerning AI-related concerns and rising oil prices. Per the full note by ING, the dollar's vulnerability is exemplified by its performance during last session's risk sell-off, as equities declined and bond yields fell. Currently, consensus sentiment indicates a stronger outlook for the euro, as shown in recent forecasts, positioning this trend amid a background of diminished safe-haven appeal for USD.