Goldman Sachs has indicated that the US dollar is likely to maintain upward pressure against the Japanese yen, barring an unexpected severe downturn in the US economy or a sharp shift towards aggressive monetary tightening by the Bank of Japan.
Strategists, including Kamakshya Trivedi, noted in a report that the combination of persistently high US yields, a low risk of recession, ongoing fiscal concerns, and the Bank of Japan's gradual pace of interest rate hikes creates a macro backdrop conducive to sustained yen weakness.
The firm has consequently revised its 12-month forecast for the USD/JPY exchange rate higher, moving from 155 to 165.
Its three-month and six-month targets for the pair have also been adjusted upward to 162 and 163, respectively, from previous forecasts of 160 and 158.
"We continue to recommend using the yen as a funding currency, alongside other low-yielding G10 currencies, to invest in higher-yielding emerging market assets," the strategists advised.
Concurrently, Goldman Sachs has lowered its outlook for the euro against the dollar, reducing its 12-month and six-month EUR/USD forecasts from 1.20 and 1.18, respectively, down to 1.12 for both timeframes.
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