Goldman Sachs Significantly Lowers Yen Forecast, Could Drop to 165 Within a Year

Odaily Planet Daily News – Goldman Sachs predicts that, influenced by the U.S.-Japan interest rate differential, the yen could drop to 165 per U.S. dollar within a year, further lowering its previous forecast of 155. This makes Goldman one of the most bearish institutions on the yen. Strategist Fishman pointed out that the yen's depreciation pressure stems from Japan's fiscal challenges, high U.S. Treasury yields, and the Bank of Japan's slow pace of rate hikes, despite the yen being significantly undervalued. Positioning supports further yen weakness. Data shows that hedge funds' bearish bets on the yen last month hit their highest level since 2017, with the market estimating a 72% probability that the dollar-yen exchange rate will reach 165 by June next year. Goldman also favors the yen as a funding currency for carry trades, i.e., borrowing yen to invest in high-yield assets. The bank forecasts the dollar-yen exchange rate to be 162 in three months and 163 in six months (previously 160 and 158, respectively), and believes that official intervention will have only a short-term effect, as the root causes of yen weakness remain. (Jin10)