Euro / Yen forecast for 2017 and 2018

Euro / Yen forecast for 2017 and 2018

Special our economic forecasts consultation with the forecast of bags, currency, macro data, euribor, interest rates … for 2016, 2017 and 2018

Evolution analysis Euro Yen:

The  Department of Analysis of Bankinter  points out in his  report Strategy for the second quarter of 2017  the euro yen analysis and  forecasts  for 2017 and 2018  (updated in December 2016 information).

Forecast Euro / Yen 2017

The yen will depreciate at a slower pace than desired. Euroyen we review the range 2017 to 125/135 (130/140 from previously estimated) and maintain the range 130/140 2018

Forecast Euro / Yen 2018

We keep the 130/140 range for 2018.

Euro Yen analysis

The yen will depreciate at a slower pace desired . Euroyen we review the range 2017 to 125/135 (130/140 from previously estimated) and maintain the range 130/140 to 2,018.

BoJ strategy and interest rate differential should help to depreciate the yen.  However, it will be slower than desired.

Inflation expectations remain very weak.  The battle against deflation is not over a long stroke ahead (IPC feb.’17: + 0.3%). For this reason the divergence between monetary policy the Bank of Japan and other central banks will expand.

As the Fed moves forward in normalizing rates and the ECB with the tapering,  the BoJ will maintain an extremely accommodative policy, pursuing the objective of bringing inflation at 2% and boost the economy . It is unlikely to increase stimulus, but continues to govern the price of bonds (bond yields to 10 years around 0.0%).

The focus now is the aim of the yield curve . It does not seem unreasonable that could raise this goal before raising the reference rate (-0.10%).

In fact, after the implementation of this measure (September 2016) inflation was positive and the yen depreciated almost – 10%, contributing to the improvement in the external sector. In our view, this trend should continue (weakening of the yen) by the interest rate differential (USA vs. Japan). However,  we identified three factors that will slow depreciation:

(i) A weak yen  could erode profit margins for imported inflation. The key is the balance point that will not damage or importing or exporting.

(ii) The expectation of a slower pace by the Fed  at the discounted by the market, will keep the dollar weakened and thus, the yen will depreciate more slowly than desired.

(iii) The geopolitical risks (Syria / US for example) or other events that trigger volatility,  increases the attractiveness of the yen as a safe haven and therefore enhances its price.

In short,  we estimate a range for euroyen in 125/135 this year  (it could even be below 125 if the Fed acts with a profile very dovish to compensate doubts about the “Trumptrade”). In 2018 the range could move 130/140.

 

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