Japanese yen: what's next?

Tuesday 17 September 2024

Cross Asset

Japanese yen: what's next?

September 2024 | A series of weak US data in July questioned the market narrative of a soft landing and brought back fears of recession. The rise in the July unemployment rate to 4.3% (latest reading in August is 4.2%) triggered a significant market concern about a possible weaker-than-expected US labor market, raising the risk of an impending recession. We do expect a significant slowdown of the US economy, but not a recession. We expect a significant deceleration in the next few quarters, consistent with a broader weakening of many labor market indicators.

01 | The yen carry trade* is being unwound sharply due to weak US data and a hawkish surprise from the BoJ, with the yen's dislocation from its fundamentals remaining large.

02 | Weak global growth and the BoJ on diverging path from most Central Banks in the world are tailwinds for the JPY. A fast trade-weighted appreciation, though, would require 1) recession or 2) a persistent hike cycle from the BoJ.

03 | The repatriation of Japanese foreign assets is not a material risk for now, but its potential for a large market impact always warrants attention.

Cross Asset | Japanese yen: what's next?

Important Information

Unless otherwise stated, all information contained in this document is from Amundi Asset Management as of September 12, 2024. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi Asset Management and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product or service. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not indicative of future results. Amundi US is the US business of Amundi Asset Management.

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©2024 Amundi Asset Management

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