BofA recommends switch from buying AUD/JPY to USD/JPY amid geopolitical risks By Investing.com

US Dollar Japanese Yen-0.18%Australian Dollar Japanese Yen-0.04%

Investing.com - Bank of America has recommended investors switch from AUD/JPY to USD/JPY positions,Domestic foreign exchange dealers citing heightened geopolitical risks and Japan’s vulnerability to Middle East tensions.

The bank closed its AUD/JPY long recommendation at 94.18, which it had opened at 92.8 on May 28, 2025, and now suggests buying USD/JPY at a reference point of 145.25 with a target of 152.0 and a stop loss at 142.0.

BofA analysts highlighted that USD/JPY works effectively as a hedge against escalation in Middle East geopolitical tensions while offering positive carry, noting that the U.S. is largely energy-independent while Japan imports almost all of its petroleum needs with more than 90% coming from the Middle East.

The bank pointed out that USD/JPY can reprice higher if oil prices remain elevated, while AUD/JPY may be vulnerable to risk-off sentiment induced by geopolitical concerns, with AUD/JPY showing an even higher correlation with the S&P 500 than AUD/USD.

BofA maintained its long position on EUR/JPY as a structural trade, referencing its March 25, 2025 report on flows and trades for Japan’s new fiscal year, while citing potential catalysts for risk-off moves including geopolitical escalation and the resumption of reciprocal tariffs.

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