BNP Paribas expects more weakness in Dollar against Euro, Yen

UNITED STATES April 28 2016 8:37 PM     

NEW YORK (Scrap Register): BNP Paribas sees further weakness  in the U.S. dollar. The Bank of Japan did not change monetary policy overnight,  surprising most market participants and bolstering the yen against the U.S.  currency.

Dollar/yen “has already declined substantially but we see  scope for the sell-off to extend further,” BNP Paribas said, listing a mid-year  forecast of 108 yen.

“Furthermore, we would expect any rallies in USDJPY  to prove short-lived as they will likely receive very good selling interest from  domestic Japanese investors who will increasingly look to buy JPY into weakness  in order to hedge their foreign-currency exposure as perceptions of further  sustained JPY weakness continue to dissolve,” BNP Paribas noted.  

Meanwhile, BNP Paribas looks for the euro to rise further as well. The  bank points out that the U.S. Federal Open Market Committee Wednesday made only  incremental changes to its policy statement, leaving forward guidance unchanged.  

“Overall, the mixed message has done little to shift the market towards  increased pricing for a near-term resumption of Fed hikes,” analyst at BNP  Paribas added.

“The Fed’s continued willingness to signal steady policy  even as the risk environment and inflation expectations improve leaves the USD  vulnerable, particularly versus the current-account-surplus currencies. We  remain long EURUSD.” Just before 10 a.m.

EDT, the dollar was down to  108.693 yen from 111.454 late Wednesday, while the euro was up to $1.13299 from  $1.13239. Metals traders closely monitor moves in the dollar since precious and  base metals alike often move inversely to the U.S. currency.