Goldman flips to yen-bullish, now sees 150 per dollar in a year

What Goldman changed

Goldman has walked back the bearish stance it adopted in July and reset its outlook in a note by Karen Reichgott Fishman. In that note, Karen Reichgott Fishman reversed the firm's 12-month yen call, setting it at 150 per dollar versus 165 previously, and at the same time bumped the 3- and 6-month targets to 158 and 155, respectively.

Why the bank moved its view

Fishman pointed to a faster cadence of Bank of Japan rate increases, saying the quicker tightening is damping the inflation impulse tied to fiscal expansion and relieving some of the currency's strain. Fishman cited a quicker pace of Bank of Japan hikes, arguing it has blunted the inflation impulse from expansionary fiscal policy and reduced strain on the currency. She also highlighted a greater likelihood that domestic portfolio flows return to Japanese assets.

"Together, these developments raise the attractiveness of being long JPY, especially to protect against an onset of recession fears," Fishman wrote. While the portfolio-flow shift is still uncertain, the rising odds create "downside asymmetry" in USD/JPY, which she said makes the yen more appealing as a hedge.

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The market backdrop

Goldman's change comes after Bank of America shifted its own view earlier to 149 per dollar by year end. In spot markets, the yen hit 158.28 per dollar on Friday, following comments from Finance Minister Satsuki Katayama that US President Donald Trump expressed concerns about yen weakness in a meeting with Prime Minister Sanae Takaichi. Even with the medium-term upgrade, Goldman still carries a cautious tactical bias now and prefers being short EUR/JPY.

What this could mean for your money

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