Goldman Sachs Group Inc. has lifted its projections for the dollar against the yen, citing a favorable macroeconomic landscape that is expected to exert downward pressure on the Japanese currency in the coming months.
In a note issued on Friday, strategists at Goldman, led by Kamakshya Trivedi, outlined their new expectations for the USD/JPY pair. They now anticipate it to hover around 155, 150, and 145 in three, six, and twelve months, respectively, compared to earlier estimates of 145, 142, and 140. The pair concluded trading on Friday at 151.41.
Goldman’s decision follows closely on the heels of the Bank of Japan’s recent abandonment of negative interest rates, alongside an indication of continued accommodative financial conditions in the near term. This move, coupled with limited insights into the future trajectory of monetary policy, pushed the yen towards its lowest levels against the greenback since 1990. Meanwhile, the Federal Reserve maintains its outlook for three interest rate cuts within the year.
“The benign macro risk environment should weigh on the yen over time,” wrote Goldman’s strategists. “We also do not expect cautious Fed cuts driven by subdued inflation to bolster the yen. If anything, the expectation of adjustment cuts has diminished the likelihood of recession risks that typically bolster the yen’s safe-haven allure.”
Additionally, Goldman adjusted its forecasts for the euro/Swiss franc pair, projecting it to reach 0.97, 0.98, and 0.99 in three, six, and twelve months, respectively, up from the previous flat estimate of 0.95. This alteration comes on the back of the Swiss National Bank’s surprise interest rate cut, signaling a more proactive stance to prevent currency appreciation.
The EUR/CHF pair concluded Friday’s trading at 0.96991.
