Yen to retreat to 1990 levels if BOJ stays dovish, Goldman says

Loose monetary policy in Japan while the Federal Reserve and other central banks hiked rates has weighed on the yen, making it the worst performer among its peers in the Group of 10 this year. The markets had been primed for a yen rally that has failed to materialize as the new head of Japan’s central bank maintained his cautious approach, thwarting hopes for more substantial BOJ action.

The strategists expect the currency could once again strengthen in 2024, reaching 135 by the end of next year. The yen traded flat near 146.51 against the dollar on Monday. It has lost more than 10 percent this year.

“The main risk to this forecast of more yen weakness over the next six months is that higher inflation and currency depreciation proves more unpopular and catalyses more forceful responses in the form of currency intervention or an earlier hawkish shift from the BOJ, or both,” they wrote.