Goldman Sachs Sees Yen Weakening to 165 Per Dollar, Favours Carry Trades
Synopsis
Key Highlights Goldman Sachs yen forecast 165 sees USD/JPY will end this year at 165 compared to the previous 155. The bank also lifted its three-month outlook to 162 and six-month forecast to 163.…
Key Highlights
- Goldman Sachs yen forecast 165 sees USD/JPY will end this year at 165 compared to the previous 155.
- The bank also lifted its three-month outlook to 162 and six-month forecast to 163.
- Goldman cited big gap in US Japan rates, fiscal drag, and slow BoJ tightening
Goldman Sachs strategist Kamakshya Trivedi revised the Goldman Sachs yen forecast 165 earlier this week, increasing the bank’s USD/JPY price target 2026 to 165 over the coming year from previously at 155, one of Wall Street’s most bearish views of the Japanese currency. For Australian investors and exporters, the forecast also emphasises the lasting attractiveness of the AUD/JPY carry trade.
It also raised its three-month forecast to 162 from 160 and six-month forecast to 163 from 158.
Rate Differentials Prolonged Pressure on the Yen
Goldman said that the USD against the yen is likely to stay under pressure because of wide US-Japan interest rate differentials, Japanese fiscal and monetary supply pressures, high U.S. Treasury yields and gradual policy tightening.
The bank said the yen is at extreme levels of undervaluation but still added that any intervention by the Bank of Japan to support the territorial currency would be likely only a short-term fix, since its underlying drivers of depreciation remain unaltered.
Carry Trade Remains Favoured
Goldman said last month that net short positions on the yen by hedge funds hit their highest since 2017.
The bank also stated that it still prefers the yen as a funding currency for the yen carry trade, while market pricing today suggests roughly a 72% odds of USD/JPY hitting 165 by June next year, in broad agreement with Goldman’s dollar strength forecast.
Source: Bloomberg
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