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Forex pairs in this Article » EUR/USD, USD/JPY (Barcelona) - Derek Halpenny, European Head of Global Market Research at the Bank of Tokyo Mitsubishi UFJ, expects the dollar to continue to hold up well, especially against the yen and the euro.

Key Quotes

“The moderating growth in Japan is doing two things. Firstly, it is raising concerns over ‘Abenomics’ and whether sustainable growth can be achieved as PM Abe tries to grapple with the 3rd arrow of ‘Abenomics’.”

“But secondly, moderating growth is also leading the market to ponder the thought that the authorities in Japan will simply revert to the 1st arrow of ‘Abenomics’ – BOJ monetary easing.”

“A Wall Street Journal article today suggests this and we certainly still expect the BOJ to up its easing in 2014, perhaps to give PM Abe more time to follow through with structural reform. Of course, for the BOJ it would be about missing its inflation goal – that goal was set high, achieving it will be difficult and more action will be required.”

“This building speculation will help equities (Topix is up 1.7% today) and ensure the yen remains weak. USD/JPY is set to slowly grind higher from here.”
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