Japanese Yen Could Drop to 135 per Dollar

On Wednesday, McKenna told CNBC’s “Squawk Box Asia” that they certainly see a move up through 130. they think that’s possible.

The foreign exchange strategist said that assuming BOJ policymakers stay committed to their easy monetary policy framework, they think a move up towards maybe 135 [yen per dollar] could be possible within the near future.

In March, the yen fell almost 6% against the dollar and continued seeing losses in April.

Yen Is Still Not in The Danger Zone

The Japanese currency has struggled for gains versus the dollar amid expectations that the Bank of Japan will lag its counterparts, such as the U.S. Federal Reserve, in normalizing monetary policy.

On Wednesday, the yen witnessed a partial recovery versus the dollar following the Bank of Japan said it would offer to buy unlimited 10-year Japanese government bonds at 0.25%. It last traded at about 128.20 per dollar, conveying a more than 5% slide against the dollar this month.

Despite the recent deficiency, Bank of Singapore’s Sim Moh Siong expresses that the Japanese currency is still quite some space from the alarm bells set off.

Japanese authorities have resorted to verbal intervention rather than the historical method of selling dollars and buying yen, expressed Sim, a currency strategist at the firm.

For now, the Bank of Japan seems prepared to stay dovish by buying an unlimited amount of bonds, he said.

Looking at the historical episodes, he said that the intervention level tends to cluster around the 127 to 132 levels. Sim suspects we probably need a higher level in terms of dollar-yen to prompt intervention.