Yen forecasts on ice, await Fed's next move: poll

Wed Sep 5, 2012 11:27am EDT
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By Sumanta Dey

BANGALORE (Reuters) - Japanese yen forecasts were frozen in the latest Reuters foreign exchange poll, showing a lack of conviction amongst strategists despite signs of an improving picture in major trading partner the United States.

Forecasters have been increasingly reluctant of late to make big bets on a depreciation in the yen, having been burned by the currency's relentless strength in recent years on safe-haven bids.

But there was an almost total lack of movement among consensus views across the various points over the 12-month horizon, as well as consistent spreads of forecasts.

A refuge for investors looking for a quick place to park cash, the yen has weakened about 2 percent against the dollar so far this year, clawing back some of the 6 percent rise it clocked in 2011.

That, said some analysts, is a reflection of the fact that Japanese policymakers remain concerned about yen strength, due to Japan's dependence on exports, and will likely to do whatever it takes to prevent it from appreciating any further.

If the U.S. Federal Reserve takes a third stab in September at printing money - or QE3 - as many in the market suspect, the Bank of Japan, which is sounding increasingly pessimistic about the domestic outlook, is likely to follow suit.

"The BoJ will respond to whatever the Fed does, and I think the Fed will probably ease policy further. It does look like we will get improvements in the U.S. economy, especially in the labor market, but the improvements will not be sustainable or substantial," said Colin Asher at Mizuho Corporate Bank.

"My best guess is that the Fed will probably extend the time frame of (holding) interest rates rather than go for asset purchases, which I think they will leave in the tank until after the elections."   Continued...