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

Odaily Odaily News Goldman Sachs expects the yen to fall to 165 against the dollar within a year, driven by the U.S.-Japan interest rate differential, a further downward revision from its previous forecast of 155, making it one of the most bearish institutions on the yen. Analyst Fishman points out that the downward pressure on the yen stems from Japan's fiscal strains, elevated U.S. Treasury yields, and the Bank of Japan's cautious pace of rate hikes, despite the yen being already significantly undervalued. Positioning supports further yen weakness.

Data shows that hedge funds' bearish bets on the yen hit a record high in the past month, with the market pricing in roughly a 72% probability of the dollar reaching 165 yen by next June. Goldman Sachs also favors the yen as a funding currency for carry trades, i.e., borrowing yen to invest in higher-yielding assets. The bank now forecasts the dollar-yen pair at 162 in three months and 163 in six months (previously 160 and 158, respectively), and believes the impact of official intervention is short-lived, as the root causes of yen weakness persist. (Jin Shi)