Svmuu News Goldman Sachs forecasts that, due to the U.S.-Japan interest rate differential, the yen will fall to 165 per U.S. dollar within a year—a further downward revision from its previous forecast of 155—making it one of the institutions most bearish on the yen.Strategist Fishman noted that downward pressure on the yen stems from Japan’s fiscal strains, elevated U.S. Treasury yields, and Bank of Japan (BOJ) a slow pace of interest rate hikes, even though the yen is already severely undervalued. Positioning in the market supports further yen weakness.
Data shows that hedge funds’ bearish bets on the yen reached a high not seen since 2017 last month, and the market estimates the probability of USD/JPY rising to 165 by June of next year at approximately 72%. Goldman Sachs is also bullish on carry trades using the yen as a funding currency—that is, borrowing yen to invest in high-yielding assets.The bank forecasts USD/JPY at 162 in three months and 163 in six months (up from 160 and 158, respectively), and believes that the effects of official intervention will be short-lived, while the underlying causes of the yen’s weakness remain. (Jin Shi)