Goldman Sachs sharply lowers its yen forecast, expecting it to fall to 165 within a year

Odaily Planet Daily News Goldman Sachs predicts that due to the US-Japan interest rate differential, the yen will fall to 165 against the US dollar within a year, a downward revision from its previous forecast of 155, making it one of the most bearish institutions on the yen. Strategist Fishman pointed out that the downward pressure on the yen stems from Japan's fiscal pressures, high US Treasury yields, and the Bank of Japan's slow pace of interest rate hikes, despite the yen being severely undervalued. Positioning supports further weakening of the yen.

Data shows that hedge funds' bearish bets on the yen hit a record high last month not seen since 2017, with the market pricing in approximately a 72% probability of the dollar-yen pair reaching 165 by June next year. Goldman Sachs is also bullish on carry trades using the yen as a funding currency, i.e., borrowing yen to invest in high-yielding assets. The bank forecasts the dollar-yen pair at 162 in three months and 163 in six months (previously 160 and 158, respectively) and believes that official intervention will have a short-lived effect, as the root causes of the yen's weakness persist. (Jinshi)