UBS Warns: Oil Disruption Could Force USD/JPY to 175 as Japan’s Yen Weakness Hits Cyclical Peak - Bitget
The desk is increasingly concerned about the potential for oil supply disruptions to drive USD/JPY to unprecedented levels, with UBS projecting a rise to 175 as the yen's cyclical weakness reaches its peak. Per the full note from UBS, this scenario is underpinned by geopolitical tensions and their impact on oil prices, which could exacerbate Japan's trade deficit and further weaken the yen. Current market dynamics suggest that the yen's depreciation is not merely a temporary phase but a reflection of deeper structural issues within Japan's economy. As such, traders should prepare for significant volatility in the USD/JPY pair as these factors unfold.
What the desk is arguing
The desk believes that the latest warning from UBS about the possible spike in oil prices may push USD/JPY to unprecedented highs around 175. This projection is predicated on the assumption that Japan's already significant yen weakness could reach a cyclical peak, exacerbated by disruptions in oil supply.
Supporting this view, JPMorgan remains the most bullish among firms with a Mar-26 target of 157.0000, closely aligning with UBS's cautionary stance. Conversely, the implicit counterfactual is that if oil prices stabilize, it might prevent the yen from depreciating sharply, tempering UBS's forecasts.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01UBS warns USD/JPY could hit 175 due to oil price disruptions.
- 02Current consensus targets show a range of weakness for JPY, diverging from UBS's extreme outlook.
- 03JPMorgan's bullish stance at 157.0000 reflects a growing consensus for further yen depreciation.
Market implications
If UBS's scenario unfolds, heightened volatility is expected in the FX market as dollar-yen crosses react to fluctuations in oil prices. This could challenge the consensus forecasts, prompting a reassessment of JPY positions across various desks.
Risks to this view
Key risks include an unexpected stabilization in oil prices, or countervailing economic data from the U.S. that could strengthen the dollar against the yen, qualifying some of the more aggressive predictions mentioned.
USD/JPY — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Rabobank | Bullish | 145.00 |
ING | Bullish | 152.00 |
MUFG | Bullish | 152.00 |
Sources & References
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