Analysts do not believe in further strengthening of yen
2022.12.22 08:07
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Analysts do not believe in further strengthening of yen
Budrigannews.com – Goldman Sachs (NYSE:) was not affected by the Bank of Japan’s Tuesday decision to increase the trading band for 10-year Japanese government bonds (JGBs). According to analysts, there was still room for the dollar to rise.
The dollar’s largest daily percentage decline since 1998 occurred on Tuesday, when it fell as much as 4% against the yen. However, the yen saw a rebound on Wednesday, reaching 132.28 yen, up 0.4 percent.
Goldman said in the research note on Wednesday that the direction the yen would take depended on whether the BOJ’s move was the beginning of a tighter monetary policy regime or just a technical adjustment, as the central bank had pointed out.
Even though the fundamental BOJ framework remained unchanged, Goldman assumed that the move by the BOJ was merely a technical adjustment and a “sign that policy rates could be adjusted further in coming month” for the time being.
Treasury yields will continue to have “more degrees of freedom” than JGBs in the bank’s baseline scenario, despite the fact that U.S. front-end rates “are overpricing recession odds and underpricing the Fed cycle.” Goldman said that this should make the dollar/yen rise in the coming months.
More Strengthening of Yen caught many funds by surprise
For the present, nonetheless, Goldman is shutting its long dollar/yen position as the market is probably going to cost in a more significant BOJ strategy change, which the U.S. speculation bank said is a genuine chance.
“While we reassess,” “we are reviewing our forecasts.”
