Goldman Sachs: If the Bank of Japan maintains a dovish stance, the yen will fall back to 1990 levels.

According to Dolphin Research, Goldman Sachs stated that if the Bank of Japan maintains a dovish stance, the yen will fall to a level not seen in over 30 years. Over the next 6 months, the exchange rate of the yen against the US dollar is expected to drop to 155 yen per dollar, the lowest level since June 1990. Previously, Goldman Sachs predicted an exchange rate of 135 yen per dollar.

"As long as the Bank of Japan stays away from raising interest rates and the stock market receives reasonable and strong support, the yen should continue to weaken," said Goldman Sachs strategists. The improvement in the outlook for the US economy is also a factor in their bearish view on the yen.

While the Federal Reserve and other central banks are raising interest rates, Japan has adopted loose monetary policies, putting pressure on the yen and making it the worst-performing currency among the G10 currencies this year. The market originally expected the yen to strengthen, but this expectation has not been realized because the newly appointed Governor of the Bank of Japan continues to maintain a cautious stance, disappointing hopes for more substantial actions by the central bank.

Strategists predict that the yen may strengthen again in 2024, reaching 135 yen per dollar by the end of next year. On Monday, the yen exchange rate hovered around 146.51 yen per dollar. The yen has already fallen more than 10% this year.

Goldman Sachs strategists stated, "The main risks facing the forecast of further yen weakness in the next 6 months are that higher inflation and currency depreciation prove to be more unpopular and prompt the Bank of Japan to take more decisive measures, either through currency intervention, an earlier shift to a hawkish stance, or a combination of both."