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USD/JPY to steadily decline below 135 on a 12M horizon – Danske Bank

Economists at Danske Bank view narrowing rate differentials between Japan and G10 to favour the JPY over the coming year.

Yield differentials to be a tailwind for the JPY over the coming year

We forecast USD/JPY to steadily decline below 135 on a 12M horizon. This is primarily because we believe that long US yields have reached their peak, although we do not expect a lot of downside from here.

We expect yield differentials to be a tailwind for the JPY over the coming year, as G10 central banks, except the BoJ, are likely to commence rate cutting cycles. In addition, historical data suggests that a global environment characterized by declining growth and inflation tends to favour the JPY.

Forex Today: US Dollar finds a foothold ahead of PCE inflation data

Here is what you need to know on Friday, December 22: The US Dollar (USD) continued to weaken against its rivals on Thursday, with the USD Index touching its lowest level since early August below 102.00 in the American session.
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USD Index trades higher around 101.80 with a negative sentiment, US data eyed

US Dollar Index (DXY) attempts to retrace the recent losses, trading higher near 101.90 during the early European session on Friday.
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