Goldman Sachs Sees Room For Yen To Weaken On Dovish BOJ Expectations

According to CNBC, Goldman Sachs said the yen could weaken further if expectations for the pace of Bank of Japan policy tightening become more dovish. Strategists led by Kamakshya Trivedi said speculation about a larger policy shift in Japan has supported the yen, but dissent from Japanese Prime Minister Takaichi's BOJ board nominees on a rate hike has renewed doubts about a broader move to bolster the currency. Goldman said BOJ Governor Kazuo Ueda's comments suggested the central bank does not think it is behind the curve, which points to a high bar for an October hike. The bank also said the global backdrop remains a drag on the yen and should stay that way if the Federal Reserve raises rates again in October, as Goldman economists expect. Goldman said it prefers being long the yen against the euro rather than short USD/JPY in the near term, and added that any meaningful reallocation of domestic assets by Japanese investors would likely be a slower process. It also said there is a reduced sense of urgency at the September BOJ meeting and no clear catalyst for near-term yen strength without intervention or more signs of portfolio shifts.