Goldman Sachs sharply revises down JPY forecast, could fall to 165 within a year

Odaily Planet Daily News Goldman Sachs expects the yen to fall to 165 per dollar within a year due to the U.S.-Japan interest rate differential, 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, persistently high U.S. Treasury yields, and the Bank of Japan's slow pace of rate hikes, despite the yen being severely undervalued. Positioning supports further yen weakness.

Data shows that hedge funds' bearish bets on the yen hit a record high last month since 2017, with the market pricing in approximately a 72% probability of the dollar rising to 165 against the yen by next June. Goldman Sachs is also bullish on carry trades using the yen as a funding currency, i.e., borrowing yen to invest in high-yield 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 official intervention will have only a temporary effect, as the root causes of yen weakness remain. (Jin Shi)