Tesla revenue dented by softer demand as Musk warns of "rough quarters" ahead
Investing.com - UBS maintains its forecast for the USDJPY to reach 140 by year-end and 136 by June 2026, as the investment bank expects Federal Reserve rate cuts to drive narrower US-Japan interest rate differentials.
The USDJPY has consolidated in a 142-148 range since May, following a significant 11% decline between January and April, according to UBS analysis. While the Japanese currency has been a solid performer in the Asian context this year, its performance has been more average compared to other G10 currencies.
The Bank of Japan’s June policy meeting did not provide momentum for the yen, as policymakers signaled a cautious wait-and-see approach to rate hikes amid uncertainty surrounding US-Japan trade negotiations. UBS notes that with the BoJ’s cautious stance, the catalyst for a lower USDJPY will likely come from Federal Reserve rate cuts rather than imminent BoJ rate hikes.
For Japanese investors, UBS sees value in certain higher-yielding currencies despite Japan’s relatively low interest rates. The bank believes long exposure to AUD, NOK, or SEK should provide positive total returns versus the JPY over the next 12 months, and suggests selling the upside potential in the JPY versus these currencies for yield pickup.
For USDJPY specifically, UBS recommends using short-term spikes in the pair to 146-148 as opportunities to add new hedges for USD exposure, noting that the highly negative carry requires significant spot appreciation of the JPY versus the USD to make hedging worthwhile.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.