Friday, July 15, 2011

Citigroup: Bullish medium-term outlook for USD/JPY

Currency strategists at Citigroup believe that Moody’s giving the US the final warning will make the nation’s authorities hurry to reach a compromise the August 2 deadline. As a result, the specialists expect investors to stop selling the greenback.

The bank especially sorts out the pair USD/JPY that may start strengthening later this year. As for the near term, American currency will likely remain under pressure as traders who used to be short on yen may be trying to cover their positions. In addition, though Citigroup projects that Japanese importers may increase demand for dollars, it won’t happen until September.

However, it’s necessary to note that as Japanese monetary authorities are very concerned about the appreciation of the national currency, Japanese corporations may start buying dollars. According to the bank, USD/JPY will find support and bottom out at 77 yen.

Analysts at RBS Securities are also bullish on dollar-yen. In their view, US economy will add about 3.5% in the second half of the year and that will be enough to push rate expectations significantly higher. Among the other dollar-positive factors the specialists cite Japanese production of autos and auto parts and lower gasoline prices. The specialists advise investors to go long on the pair buying below 79.50 and holding position for 3-6 months.

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