Goldman Sachs lifts USD/JPY forecasts to 162 in 3 months, 165 in 12 months; says yen intervention would be temporary

According to CNBC, Goldman Sachs turned more bearish on the Japanese yen and raised its USD/JPY forecasts to 162 in three months, 163 in six months and 165 in 12 months, from 160, 158 and 155, respectively, saying any Japanese market intervention to support the currency would likely have only a temporary impact. The bank’s revised outlook follows the yen falling to its weakest level against the dollar in four decades last week, keeping Japan’s Ministry of Finance in focus as investors watch for possible intervention. Goldman cited a macro backdrop of higher-for-longer U.S. yields, low recession risk, fiscal concerns and only gradual Bank of Japan hikes, and said it expects USD/JPY to resume climbing after any intervention unless there is an unexpected negative U.S. growth shock or a more aggressive BoJ tightening pivot. Goldman also said Japan’s fiscal stimulus plans could lift domestic bond term premiums relative to U.S. Treasurys, a dynamic it said has historically coincided with further gains in USD/JPY. Separately, Goldman said it expects the dollar to stay strong, revised its EUR/USD forecasts to 1.14 in three months and 1.12 in six months and 12 months, and said it strengthened forecasts for the Indian rupee and became more optimistic on Colombia’s peso while continuing to favor using the yen as a funding currency for high-carry emerging-market trades.