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Goldman Sachs Lowers USD/JPY Forecasts Amid Bank of Japan Policy Shift
Goldman Sachs has revised its USD/JPY forecasts, projecting the exchange rate to reach 158 in three months, 155 in six months, and 150 in twelve months. This marks a significant reduction from previous targets of 162, 163, and 165, reflecting a shift in the economic landscape in Japan. The bank's strategist, Karen Reichgott Fishman, attributes this change to an improving policy environment and the potential for Japanese investors to repatriate funds back to domestic assets as the Bank of Japan (BOJ) tightens its monetary policy.
The BOJ recently raised its policy rate to 1.25% and indicated a focus on stabilizing inflation at 2%, rather than pushing it higher. This aggressive stance is seen as a counterbalance to Japan's expansionary fiscal policy, which could otherwise exert inflationary pressure. Goldman Sachs believes that these developments enhance the appeal of long yen positions, particularly as a hedge against recession risks.
Despite the recent climb of USD/JPY towards 160, supported by high US yields, Goldman Sachs maintains a cautious approach. The bank favors selling the euro against the yen instead of directly betting against the dollar, as this strategy allows for capitalizing on yen strength without depending on fluctuations in US yields. Additionally, the possibility of further intervention by Japanese authorities is expected to limit the dollar's gains against the yen.
Source: KLEA News