Goldman Sachs Cuts Yen Forecast to 165 per Dollar, Favors Carry Trades

Goldman Sachs Group Inc. has revised its yen forecast, now expecting the Japanese currency to weaken to 165 per US dollar over the next 12 months. The revision reflects the bank's view that interest rate differentials between Japan and the United States will remain wide, sustaining the yen's depreciation trend. Goldman also expressed a preference for yen-funded carry trades, a strategy that profits from borrowing in low-yielding currencies to invest in higher-yielding ones.

The yen has been under sustained pressure as the Bank of Japan maintains its ultra-loose monetary policy while the Federal Reserve keeps rates elevated to combat inflation. This divergence has kept the US-Japan rate spread near multi-decade highs, making the yen a popular funding currency for carry trades. For traders tracking these moves on NowPrice's live rates dashboard, the widening spread continues to favor dollar-yen upside, though intervention risks from Japanese authorities remain a key watchpoint.

Looking ahead, market participants will focus on upcoming US inflation data and Bank of Japan policy meetings for further clues. Any hawkish shift from the BOJ could challenge Goldman's forecast, while stronger US data would reinforce it. Traders should also monitor comments from Japanese officials, as verbal intervention has historically triggered sharp but short-lived yen rebounds. The 165 level represents a key psychological threshold that could prompt policy responses if approached quickly.