To remain heavy near-term before rebounding towards 135 into Q3 – BofA

Bank of America Global Research discusses USD/JPY
outlook and sees the pair staying around current levels before
rebounding over the coming months.

We expect USD/JPY to rebound as we think the most the BoJ could
deliver in 2023 would be a removal of YCC and NIRP, but not a proper
hiking cycle still priced by the market, with our base case being no
change. FX carry and a BoP deficit would weigh over JPY once policy
uncertainty declines after the new BoJ governor comes in,” BofA notes.

“We are more constructive on USD/JPY vs consensus and expect
USD/JPY will rebound above 135 by 3Q23 before declining into 2024. But
we think USD/JPY remains top-heavy in 1Q23 with elevated policy
uncertainty,” BofA adds.

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