Fantasy Currency Trader (Pound Yen) - Analysts Forecast GBP JPY Exchange Rate Gains

September 22, 2014 - Written by John Cameron

STORY LINK Fantasy Currency Trader (Pound Yen) - Analysts Forecast GBP JPY Exchange Rate Gains

NEW Feature: Our leading currency exchange analyst investigates the future prospects for one of the major global currency pairs, making his future currency forecast for their future performance targets. Track his predictions in the Fantasy Currency Trader column, below...

The JAPANESE YEN (currency:JPY) has suffered pronounced selling pressure since Shinzo Abe took over the premiership of the Eastern powerhouse two years ago. The ‘three arrows’ of Abenomics have seen the Pound Sterling Japanese Yen exchange rate climb from its September 2011 low of 116.8370 GBP JPY. The heady combination of monetary expansion in the form of Quantitative Easing combined with fiscal stimulus and structural reforms aimed at kick-starting the flagging Japanese economy out of its ‘lost decade’ of slumber which followed the nation’s banking crisis which struck in the mid to late 1990s.

The combined policy action from Abe has had the welcome side effect of weakening the Japanese tender and, in combination to a relief rally for the Pound Sterling following the ‘No’ vote in Scotland’s referendum, sent GBP JPY up to its highest level since October 2011 during last Friday’s session, touching 180.7180 in early trading. Some analysts suggest that, with global central banks looking to tighten their monetary policy and with unrest across the Arab world and on the fringes of the euroland in Ukraine, the Yen may be about to enjoy a renewed bout of safe-haven support.

However, we believe that Abe is not yet done with his reforms and, although the Bank of Japan resisted the temptation to ramp up its Quantitative Easing programme at its latest policy meeting during the first week of this month, there is highly likely to be more QE, amongst other extraordinary measures, to come. For this reason, we foresee further gains for the Pound Sterling Japanese Yen exchange rate in the short to medium term.

Our recommendation is to BUY the Pound Yen exchange rate from its current level of 178.260 GBP JPY with a block of GBP10,000. An ultimate target for the trade comes at August 2007’s multi-decade peak of 251.090.

Keep checking back on this column to see how we get on!

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TAGS: Fantasy Currency Trader Forecasts Japanese Yen Forecasts Pound Sterl Forecasts