Economists at Goldman Sachs expected the Japanese yen to decline to levels last seen more than 30 years ago if the Bank of Japan sticks to its dovish monetary policy.
Over the next six months, the local currency exchange rate is likely to reach 155 yen against the US dollar - the weakest level since June 1990 - according to bank strategists, compared to previous expectations that it would reach 135 yen per US dollar.
"As long as the Bank of Japan stays away from raising interest rates and stocks remain at a reasonably strong support point, the yen should continue its downward trend," the bank's strategists wrote in a note to clients last Friday. The improvement in economic growth expectations in the United States was also a factor on which the bank's economist's view was based.
Japan's accommodative monetary policy negatively affected the yen as the US Federal Reserve and other central banks raised interest rates, making it the worst-performing currency among its peers in the top ten group of currencies this year.
The markets were ready for a rise in the yen's exchange rate, which did not materialize as the new head of the Bank of Japan maintained his cautious approach, disappointing hopes that the Bank of Japan would take more effective measures.
Strategists expect that the Japanese currency may rise again during 2024 to reach 135 yen against the dollar by the end of next year. The yen traded flat at around 146.51 yen against the dollar yesterday. The currency has lost more than 10% of its value during the current year.
The experts concluded their note: “Forecasts of a further weakening of the Japanese yen over the next six months face the risk that rising inflation and currency depreciation will generate greater dissatisfaction and trigger stronger reactions in the form of intervention to manage the exchange rate or the Bank of Japan’s move to tighten monetary policy in earlier, or both.
Follow the latest news on Google News
