USD/JPY seen lower at 103.00 over the next 12 months – Goldman Sachs

In the view of the analysts at Goldman Sachs, USD/JPY is likely to drop amid a rebound expected in the yen and Fed rate hike bets pushed back.

Key quotes

“In the medium-term USD/JPY may rise, due to boosts from the vaccine surge in growth and inflation.”

“But then heads lower as aggressive Fed hike bets are cut back ...”

"We expect no hikes until 2024, whereas markets price about three hikes before then.0"

"In the second half of 2021, when we will be on the other side of the vaccine-led surge in US activity, and when Japan's own vaccination campaign should be catching up, we expect USD/JPY to turn lower again."

“Speculative yen shorts have accumulated despite the lack of evidence of Japanese foreign bond purchases accelerating.”

“A swing from longs to shorts in Q1 likely helped yen depreciation and this pressure on the currency is likely gone.”

“The yen is cheap relative to longer-term valuation.”