After the yen fell to a record low against the euro, Mitsubishi UFJ (MUFG) believes the currency's decline may extend into next year, as the euro is expected to continue outperforming in the coming months. The EUR/JPY pair hit a historic high of 180.10 on Tuesday, and MUFG forecasts it could rise to as high as 185 by mid-2026.
"We maintain our bullish outlook for the euro against the dollar," said Lee Hardman, senior FX strategist at MUFG. He expects EUR/USD to climb to $1.26 by Q3 2026, as the Federal Reserve may adopt more aggressive rate cuts once Jerome Powell's successor is confirmed, putting downward pressure on the dollar.
With increasing short positions on the yen, Hardman warns that the risk of a sharp reversal is also rising if market sentiment suddenly shifts.
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