Goldman Sachs: "Yen to fall to 165 yen"...Will its 40-year low deepen further?

▲ Japanese Yen (JPY)/AI Generated Image

Wall Street has warned that the Japanese yen, which has fallen to a 40-year low, could further decline to 165 yen per dollar. Goldman Sachs lowered its outlook for the yen even further than its previous forecast, expecting Japan's market intervention to have a limited effect.

According to cryptocurrency-focused media outlet BeInCrypto on July 6 (local time), Goldman Sachs predicted that the yen-dollar exchange rate would reach 165 yen per dollar within the next 12 months. This is a significant increase from its previous forecast of 155 yen. The yen has fallen to its lowest level against the dollar since 1986 and is showing the weakest performance among major currencies in 2026.

The short-term outlook has also become more pessimistic. Goldman Sachs raised its 3-month yen-dollar exchange rate forecast from the previous 160 yen to 162 yen. The 6-month forecast was also raised from 158 yen to 163 yen. Goldman Sachs strategist Karen Reichgott Fishman cited the long-term high-flying US Treasury yields, low recession risk, Japan's fiscal pressure, and the Bank of Japan's (BoJ) gradual interest rate hikes as factors contributing to the yen's weakness.

It was also evaluated that the Japanese government's intervention in the foreign exchange market would be difficult to reverse the trend. Goldman Sachs stated, "Unless there is an unexpected US growth shock or a more aggressive shift to tightening by the Bank of Japan, it is difficult to find a reason for the yen-dollar exchange rate's upward trend to stop." Although Japan's Ministry of Finance is monitoring the foreign exchange market, the effect of official intervention is expected to be temporary.

Investors' positions also support the outlook for a weaker yen. Hedge funds' bets on a weaker yen increased to their highest level since 2017 last month. Traders see approximately a 72% chance of the yen-dollar exchange rate reaching 165 yen by June 2027.

Goldman Sachs expects the dollar to remain strong, citing the US artificial intelligence investment boom and energy supply pressures. While lowering its euro forecast, it presented a more optimistic view for the Indian rupee and Colombian peso. US growth and whether the Bank of Japan shifts its monetary policy were presented as key variables for changes in the yen's weakness outlook.

[Article Summary]

-Goldman Sachs raised its 12-month yen-dollar exchange rate forecast from the previous 155 yen to 165 yen.

-Long-term high US Treasury yields and the Bank of Japan's gradual interest rate hikes were cited as factors contributing to the yen's weakness.

-Traders see approximately a 72% chance of the yen-dollar exchange rate reaching 165 yen by June 2027.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*