Saxo Bank: Yen still has upside potential but the pace is slow

Swiss Julius Baer Bank's foreign exchange strategist Dr. Claudio Wewel released the latest market research report, pointing out that the Japanese Yen weakened slightly after stopping its upward trend last week, attracting market attention to its future direction. Although the recent decline in the USD/JPY exchange rate has significantly narrowed the forex yield spread, it has not completely closed, indicating that the Yen still has further upside potential. Given that recent data shows that most speculative short positions have been cleared, the Yen's appreciation pace will be slower. Therefore, it is expected that the USD/JPY will remain at current levels in the short term and trend towards 140 yen to 1 US dollar by the end of the year. A series of events have triggered the Yen's rebound, including: weaker-than-expected US CPI in June, forex intervention strengthening the initial trend, the hawkish stance of the Bank of Japan's July meeting, as well as disappointing US manufacturing and labor market data. Perhaps most importantly, the significant rebound of the Yen has triggered what may be the largest Yen carry trade unwinding in 20 years. Although this unwinding has significantly narrowed the spread between the USD and JPY, it has not completely closed, indicating that the Yen still has further upside potential