Investing.com – Aggressive actions within the Japanese yen this week, largely versus the U.S. greenback, have prompted discuss of official intervention. While this might be seen as an indication of utmost greenback power, UBS pointed to yen weak spot, saying the greenback gives extra upside on a broader scale.
“The past week has been a consequential one for ,” stated analysts at UBS, in a observe dated May 1, because the Bank of Japan caught to a dovish tone at its assembly, leading to USDJPY climbing above 160 on Monday, “and spurring what markets believe was FX intervention.”
“What we see as extreme JPY weakness has in some cases been conflated with excessive USD strength. We disagree with that framework and think the USD has more upside against G10 more broadly, even if it’s hard to call it ‘cheap’,” UBS added.
The financial institution famous that there was some discuss of concerted motion within the international change markets of the same nature to the Plaza and Louvre accords of the Nineteen Eighties.
However, “we find that the context was markedly different and see high hurdles to a similar round of joint actions to weaken the greenback this time round,” the financial institution stated.
“A major shift in U.S. attitudes would be necessary as a starting point, alongside a deterioration in the trade deficit that starts to take on the hue of what’s already been seen in the fiscal deficit. That is absent for now.”
The broad U.S. greenback is effectively beneath 2022 ranges, UBS stated, and much from extremes.
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“It still has more to give.”
UBS continues to carry lengthy positions towards the G10 currencies, the Canadian greenback and Swiss franc.
On the Swiss franc, “we note that there were some signs that the SNB [Swiss National Bank] may have bought forex in March, which if proved correct would further underpin our long-standing bearishness on the currency,” UBS added.