BANGALORE (Reuters) - The Japanese yen is set to gradually weaken against the U.S. dollar over the year, although at a markedly slower pace than was forecast last month even as the Bank of Japan attempts to tame its stubborn rise.
Consensus forecasts for the yen in the latest Reuters poll of more than 60 strategists taken this week were scaled back considerably from a similar survey a month ago.
The dollar is expected to end September at 85.0 yen, before inching to 86.0 yen in three months, 89.5 in six and 95.0 in 12 months.
These are the strongest yen forecasts since at least January 2008 and some analysts believe the currency is set to touch new highs in the near term unless the Bank of Japan steps in with bolder intervention measures.
“Price action over the past few days has demonstrated that BoJ policy has become ineffective in slowing yen appreciation,” said Kenneth Broux at Lloyds TSB Corporate Markets.
“In the context of a weakening U.S. economy and the clouded outlook for risk assets, I suspect the yen will stay supported in the short term.”
August proved to be a crucial month for the safe-haven currency, as it soared to levels not seen in 15 years, with a barrage of gloomy U.S. economic data cutting risk appetite and quelling any hopes of an immediate recovery.
The yen’s rise last month, which threatens to hurt export-reliant Japan’s fragile economic recovery, caught strategists off guard in last month’s survey, with only six of 52 seeing the USD/JPY at levels below 85 by end-August.
The dollar closed at 84.16 yen on August 31.
The BoJ decided on Monday to expand its fixed-rate fund supply scheme to 30 trillion yen from 20 trillion yen, and to launch a new six-month loan operation in addition to an existing three-month scheme.
The move, which did little to curb the yen's rise, disappointed markets and drove Japan's Nikkei .N225 stock index down 16 percent -- making it one of the worst-performing markets in the world this year next to China and Greece.
Only three of 63 strategists in the latest poll see the dollar at below 80 yen over the period forecasted.
While many hope currency intervention by the Japanese authorities is on the cards, some believe the BoJ and the Ministry of Finance will hold fire unless the dollar slips to the record low of 79.75 seen in April 1995.
“People have that view that 85 (yen) was going to be some kind of line in the sand that would bring forward the Ministry of Finance to order the Bank of Japan in,” said Ray Attrill at 4Cast.
“But we were never really thinking as high as that and the Japanese were still fundamentally quite reluctant to go back down the route of intervention.”
Calculated cross rates saw the EUR/JPY at 107.6 in one month, 108.0 in three months, 109.3 in six and 114.5 in 12 months.
FRANC TO FALTER?
The Swiss franc is set for a slight reversal in trend and will weaken against the euro, according to the latest poll.
The euro is seen ending September at 1.306 francs before strengthening to 1.319 in six months and 1.350 in 12 months.
The swiss franc hit an all-time high at 1.2985 against the euro last month as mounting fears about the euro zone crisis saw investors scurry to the safety of the swissie, rattling the Swiss National Bank (SNB) which until June was intervening directly in currency markets to stem the franc’s rise.
“No SNB response will ultimately tease investors to test new all-time (euro) lows: with 1.30 gone and dips below 1.29 already tested, we think that 1.28-1.27 will be in the cards,” said Roberto Mialich at UniCredit.
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