Analysts at Goldman Sachs Group Inc. expect the yen to weaken to 165 per dollar over the course of the year, primarily due to the interest rate differential between Japan and the U.S. This is one of the most pessimistic forecasts among analysts surveyed by Bloomberg.
This shift is linked to fiscal pressures in Japan, persistently high yields on U.S. Treasury bonds, and the Bank of Japan’s gradual interest rate hikes, as strategist Karen Reichgott-Fishman noted in her report.
“These factors strongly suggest the need for further currency depreciation, even though it is already significantly undervalued, according to our forecasts,” she emphasized.
The market is confirming expectations of further yen weakness. Last month, hedge funds increased their short positions on the Japanese currency to their highest level since 2017. Currency traders estimate the probability of the dollar rising to 165 against the yen by June of next year at approximately 72%.
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