US dollar gains unlikely to be sustained
At a Glance
The desk believes that recent gains in the US dollar are unlikely to be sustained, particularly in light of the outcomes from the FOMC and BoJ meetings. Per the full note from MUFG EMEA, the discussions surrounding the BoJ's policy decisions and the potential influence of the upcoming LDP leadership election on the yen are critical. This suggests that any strength in the dollar may be short-lived as market participants reassess their positions. The desk's view is further supported by the current positioning trends and the lack of high-impact events in the near term.
Key Takeaways
Full Analysis
What the desk is arguing
MUFG's analysis puts forward the notion that the US dollar's recent strength may not be sustainable in the short term. Central bank policies, particularly from the BoJ, are seen as key variables that could hinder the dollar's performance against the yen in the coming months.
The commentary refers to the potential impact of the LDP leadership election on BoJ policy, indicating a fluid situation that investors should closely monitor. This adds a layer of uncertainty to the dollar's trajectory, contrasting the relatively stable expectations set by other market participants.
Where it sits in our coverage
Our current consensus target for USD/JPY is 147.5 by December 2026, with a range from 150.0 to 157.0 across firms. This aligns closely with MUFG's forecast of 146.0 but is still below the higher targets set by more bullish analysts like JPMorgan, who maintain a December target of 164.0.
Focusing on specific firms, here are some notable December targets: - JPMorgan: 164.0 - Goldman: 148.0 - Barclays: 149.0
How other firms see it
The broader sentiment among firms shows a divergence in outlook compared to MUFG's caution. For example, JPMorgan is significantly more optimistic than MUFG, setting a higher December target. However, firms like Morgan Stanley and Deutsche Bank seem more aligned with MUFG's conservatism, targeting lower figures.
- Goldman: 148.0
- Barclays: 149.0
- Morgan Stanley: 140.0
Market Implications
If MUFG's predictions hold, traders should prepare for potential shifts in USD/JPY dynamics, particularly if BoJ policy changes influence market sentiment. A weakening dollar could prompt repositioning among major firms and influence broader forex strategies.
USD/JPY — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UOB | Bearish | 159.60 |
Bank of America | Bullish | 149.00 |
Rabobank | Bullish | 145.00 |
From the original
Following the FOMC meeting on Wednesday and the BoJ meeting on Friday, Derek Halpenny, Head of Research Global Markets EMEA and International Securities talks to Chris Jack Jakubowski, Hedge Fund FX Institutional Sales about the impact of these central bank meetings on USD/JPY an
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