With the risk of Bank of Japan (BoJ) intervention hanging yen is likely to lose grounds against its major trading counterparts, including the euro. While the euro is facing a major risk of depreciation over the UK referendum, in which Britons have chosen to exit the union, the immediate depreciation risks have come down. Market turmoil was limited post-referendum as the central banks around the world were well prepared to provide as much liquidity as needed through the swap lines.
In addition to that, UK’s internal political turmoil seems to be stabilizing as Theresa May becomes the next and second female Prime Minister. This stability is likely to provide support to the Euro, at one hand, and reduce risk aversion in the other.
Hence we expect, Yen to go for much deeper correction before selling pressure may resume. If the Bank of Japan (BoJ) do provide the next level of stimulus it is likely that the euro may push higher towards 130 against the yen. The euro is currently trading at 116 against the yen.
