Goldman Sachs sharply lowers yen forecast, predicting it could drop to 165 within a year

Odaily reported that Goldman Sachs expects the yen to fall to 165 against the U.S. dollar within a year, influenced 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. Strategist Fishman noted that the pressure for yen depreciation stems from Japan's fiscal pressures, high U.S. Treasury yields, and the Bank of Japan's slow pace of rate hikes, despite the yen being severely undervalued. Position allocation supports further yen weakness.

Data shows that hedge funds' bearish bets on the yen hit a new high since 2017 last month, with the market estimating about a 72% probability of the dollar rising to 165 against the yen by June next year. Goldman Sachs is also optimistic about carry trades using the yen as a funding currency, meaning borrowing yen to invest in high-yield assets. The bank forecasts the dollar-yen rate will be 162 in three months and 163 in six months (previously 160 and 158, respectively), and believes that official intervention has only a temporary effect, as the root causes of yen weakness persist. (Jin Shi)