According to a Bank of America survey, global investors expect the Japanese yen to outperform major currencies next year, predicting a rebound after a turbulent year that saw it deliver the worst returns against the U.S. dollar. In the survey of around 170 fund managers, about one-third identified the yen as likely to achieve the best returns in 2026, with gold and the U.S. dollar ranking next. Only 3% of respondents favored the British pound.
The yen's prominence in the survey contrasts sharply with its lackluster performance this year. The USD/JPY pair has risen just 1% year-to-date, making it the worst performer among G10 currencies. Meanwhile, gold prices have hit record highs in 2025, supported by central bank demand and retail safe-haven buying amid geopolitical and trade risks.
On the other hand, the Bloomberg Dollar Index has fallen about 7% this year, on track for its worst annual performance since 2017, weighed down by uncertainty over U.S. President Trump's policies.
The yen's underperformance has been partly attributed to the Bank of Japan's ambiguous stance on rate hikes this year, as well as the election of new Prime Minister Sanae Takaichi—a supporter of loose monetary policy—whose government is preparing a larger-than-expected spending plan.
However, investors' optimism for the yen in 2026 may stem from its current undervaluation, which reflects persistently weak investment in Japanese assets. The same BofA survey respondents reported a net underweight position of 4% in Japanese equities, a view held for over a year.
Bloomberg Intelligence strategists Audrey Childe-Freeman and Stephen Chiu noted, "If the U.S. Treasury highlights the USD/JPY rebound in its next macroeconomic and foreign exchange report due in November, monetary policy dynamics could return to focus."
Risk-tolerant traders may also bet on Japanese authorities intervening to support the yen in coming months—similar to last year’s action when the currency breached the key 160-per-dollar level.
Francesco Pesole, currency strategist at ING in London, wrote on Tuesday, "Speculators remain clearly positioned long USD/JPY, testing the Ministry of Finance’s tolerance, while verbal warnings continue to have diminishing marginal impact. Any line in the sand is likely around 160, with further upside pressure possible in the coming days."
The survey, part of BofA’s monthly global fund manager poll, was conducted from November 7–13 among 172 investors managing a combined $475 billion in assets.
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