The effects of the Bank of Japan's recent surprise easing on the yen will fade, and the currency will return to the levels of strength seen recently when the U.S. dollar tested Y75.00, Bilal Hafeez, global head of foreign-exchange research at Deutsche Bank said in an interview.
"A lot of investors want to see the yen weakened on a sustained basis, but I don't think that's going to happen yet. The actions last week were in some sense like the recent attempts at currency intervention," he said. "Unless Japan is going to continually step up and do more [easing]," the dollar will continue to sink against the yen.
Hafeez spoke to Dow Jones in an interview on the sidelines of a conference in Singapore.
Hafeez also said the argument that Japan's shifting trade dynamics will weaken the yen are overplayed. Japan will return to a trade surplus in 2012, after disruptions from the tsunami pushed it into a trade deficit for the first time last year, he said. In addition, Japan's external investment position is large and growing, and so its current-account balance will support yen strength for some time, he said.
The U.S. dollar has gained against the yen since the BOJ announced last week it would expand its asset purchase program, rising from Y77.59 before the announcement to trade at Y79.78 late Tuesday in Asia.
He said oil prices and geopolitical factors that could push those prices higher pose a significant risk to Asian currencies and the global economy this year. "If there is some kind of Iran-Israel conflict, that's the obvious big risk. But even outside of that, the improvement in global growth will increase demand, and oil is going to grind higher."
Higher oil prices would hit currencies of oil importers like the Korean won and Singapore dollar particularly hard. The price of oil will begin to crimp global growth when Brent crude reaches levels of around $140 to $150 a barrel, he said.
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