Headline: Goldman Sachs Sees More Yen Weakness, But Intervention Threat Caps USD/JPY
The Japanese yen remains under pressure as wide rate differentials persist, and Goldman Sachs expects the currency to weaken further in the near term. However, the bank cautions that mounting intervention risks from Japanese authorities could curb the upside in USD/JPY, keeping rallies in check even if fundamentals still favor the dollar.
According to the bank, the typical conditions for outright foreign-exchange intervention have not yet been met, giving USD/JPY room to edge higher. Even so, stronger verbal guidance from Tokyo is likely to act as a ceiling on gains. A swift push toward the 161–162 area could become a key trigger for formal action, with officials focused on the speed of moves as much as the level.
Given the backdrop, Goldman Sachs is not inclined to maintain outright short positions in the yen. Instead, it prefers a carry strategy: going long select emerging-market currencies funded against lower-yielders such as CAD. The firm also flags potential downside risks to the US labor market that could soften Treasury yields and temper further US dollar strength, adding another reason to be selective rather than aggressively bearish on the yen.
Key Points: – Goldman Sachs expects additional yen weakness in the short term. – Rising intervention risk from Tokyo may cap USD/JPY rallies. – Officials are more likely to respond to rapid moves; a jump toward 161–162 is seen as a potential trigger. – Verbal intervention could restrain upside even without direct market action. – Strategy tilt: favor EM carry trades funded from lower-yielding currencies such as CAD over outright JPY shorts. – Weaker US labor data could reduce US yields and limit dollar momentum.
