Bank of America: stop betting against the yen
Fed's measures in the form of rate cuts and the launch of an aggressive asset purchase program helped to stop the panic in the markets in March and, consequently, the rally of the yen, which was previously the preferred funding currency. However, the subsequent recovery of risk assets could not become a driver for growth for USD/JPY pair. Investors bought back the fall in April, but Bank of America notes that the bulls have not been able to show a confident strategy for a long time, and the pair as a whole keeps a steady downward trend.
Bank keeps the bear camp in assessing the prospects of USD/JPY. The lockdown of the key economies of the world and the reduction of carrie positions in the yen in March and April offset the pressure on the USD/JPY. However the rapid expansion of the Fed's balance sheet coupled with the US fiscal measures will remain a pressure factor on the US dollar for the foreseeable future. In its turn, the lifting of restrictions will support the recovery of exports from Japan, while low oil prices suggest lower imports. BofA also notes the general weakening of M&A activity and unattractive hedging of investments in foreign bonds as factors that will contribute to the gradual strengthening of the yen in the coming months.