Citi has issued a statement addressing the potential outcome of the Liberal Democratic Party presidential election in Japan and its impact on the currency pair.
The financial services company noted that it was difficult to predict the impact of the elections on the exchange rate due to the crowded nature of the race.
According to Citigroup, the main risks to the USD/JPY pair depend on who wins the election. If Sanae Takaichi wins, it could be seen as a negative factor in the Bank of Japan’s monetary policy normalization, which could weaken the Japanese yen.
Conversely, a win for Shigeru Ishiba could signal a move away from Abenomics-style policies, which could strengthen the yen.
Despite the uncertainty, Citi’s USD/JPY forecast remains unchanged. The firm expects the pair to not fall below 140 yen/USD until next year. However, there is also a possibility of a rebound to a range between 151 yen/USD and 155 yen/USD before then.
Citi stressed that while the risks are to the downside for the USD/JPY pair, it does not expect a significant deviation from the current scenario.
These expectations indicate a level of stability in the currency pair, despite the political variables affecting the market. Citi analysis suggests careful monitoring of the election results, given their potential implications for currency market dynamics.
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