After two straight years seeing bets on a yen rebound turn into the cold reality of further declines, some strategists reckon third time will be the charm for Japan’s beleaguered currency.
The likelihood of a series of interest-rate hikes from the Bank of Japan and further cuts from the Federal Reserve will drive the Japanese currency’s recovery to as far as ¥130 against the dollar, according to some. The projections come with a high degree of caution, given the yen’s volatility through 2024, and the difficulty of anticipating how U.S. President-elect Donald Trump’s return to the White House may impact Fed policy and global markets.
A stronger yen would reverberate across asset classes, creating a drag for Japan’s equities while boosting the capacity of the nation’s cashed-up companies to make acquisitions abroad. Investors would also be less inclined to use the currency to fund investments in higher-yielding alternatives overseas and may be more willing to funnel money home.