Goldman Sachs has recently revised its currency exchange forecasts, particularly focusing on the US dollar against the Japanese yen. The firm anticipates a significant weakening of the yen in the near future due to a favorable macroeconomic setup.
This new projection is a marked change from their previous stance, with the firm now expecting the USD/JPY exchange rate to hit 155, 150, and 145 over the next three, six, and twelve months, respectively, as reported by Bloomberg. This adjustment in forecast represents a more bullish outlook for the US dollar against the yen, indicating an expectation of a stronger US dollar or a weaker yen in the coming months.
The upward revision in Goldman Sachs' forecast follows closely on the heels of a key policy shift by the Bank of Japan. Recently, the Bank of Japan made a significant move by discontinuing its negative interest rate policy, a unique stance in the global financial landscape. Despite this policy shift, the Bank has indicated its intention to continue with supportive financial conditions for the foreseeable future.
However, it has provided limited guidance regarding the direction of its future monetary policy, creating a degree of uncertainty in the market. Following this announcement, the yen experienced a notable decline, reaching its lowest level against the US dollar since the early 1990s.
Goldman Sachs' strategists have expressed their view on the macroeconomic environment and its impact on the yen. They argue that the current stable and benign macroeconomic risk environment is likely to have a depreciating effect on the yen over time.
Additionally, they are skeptical that the Federal Reserve’s potential interest rate cuts, motivated by a decrease in inflation, would contribute to strengthening the yen. Their analysis suggests that the anticipation of these rate adjustments has already reduced the perceived risk of a recession.
Normally, the yen is seen as a safe-haven currency during economic downturns, but the diminished recession risks lessen the likelihood of the yen strengthening under current conditions.
In addition to the USD/JPY forecast, Goldman Sachs has also revised its projections for the euro/Swiss franc exchange rate. The firm now predicts that the euro will gradually strengthen against the Swiss franc, reaching exchange rates of 0.97, 0.98, and 0.99 over the next three, six, and twelve months.
This is a departure from their earlier prediction of a stable rate at 0.95. The change in Goldman Sachs’ outlook is a response to a surprising move by the Swiss National Bank, which recently implemented an interest rate cut.
This decision by the Swiss National Bank indicates a more proactive and assertive approach to monetary policy, aimed at preventing the appreciation of the Swiss franc. Such an aggressive stance can influence currency values and is a key factor in Goldman Sachs' updated currency exchange rate forecasts.
24.03.2024
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