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Forex Flash: What if USD/JPY rally only a 25% discount of Japan's policy succeeding? - HSBC

As HSBC notes, the OECD measures of purchasing power parity place “fair value” for USD/JPY at 105, thus "under a hyper-successful reflation strategy, one would expect the JPY to be considerably undervalued not overvalued, say a level like 120 on USD/JPY" HSBC strategists note.

The bank brings up a theory which "paints the move above 90 in a different light..." they say, as "the market may simply be attaching a 25% probability to an overly successful reflation strategy, one that would see USD-JPY move from 80 to 120."

"We saw the market apply a similar approach during the euro crisis where spot would reflect a varying probability of the tail risk of euro break-up. But in Europe, the FX market was attaching a probability to policy failure, in Japan they are attaching a probability to excess success" HSBC concludes.

Forex: USD/JPY stalls below the 94.00

Less than 1 hour to go for Japan current account figures to be out, USD/JPY pair is currently trading at 93.70, a +1% up for the week, and about 15 pips above previous Asia-Pacific open yesterday. Since anticipated general elections were called in Japan by mid Nov, USD/JPY has rose more than +17%, reaching highs above 94.00 not seen since mid 2010.
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Forex: Seasonals in favour of JPY - TDS

With USD/JPY enjoying a 13 week winning streak, longest period since year 2005 when it rose for 12 weeks, but not as fast, “an unusually long spell of correction-free gains,” say Toronto based FX Team at TD Securities, last at 93.63, “Seasonal pressures trend against the USD and favour the JPY from February through mid- year and we think the JPY has already reflected a lot of policy changes that the BoJ is able or willing to make for the moment,” the analysts add.
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