Strategists said intervention alone is unlikely to reverse yen weakness, with most arguing the Bank of Japan must raise rates for a lasting impact.
The U.S. dollar is expected to stay firm in the coming months before weakening later in the year, while consensus forecasts for the Japanese yen have fallen to their weakest levels since Reuters began polling in 1993. In the July 31-August 5 Reuters survey, nearly 95% of about 60 foreign-exchange strategists said future Japanese intervention by itself would not sustainably halt the yen’s weakness, and nearly all of that group said the Bank of Japan would also need to raise interest rates to make a durable difference. Median forecasts showed the yen, trading around 158 per dollar, slipping to 159 in three months before recovering to 157 in six months and 154 in a year as the dollar eases. The euro was seen holding near $1.15 over the next three months, then strengthening to $1.16 by end-January and $1.18 in a year. The poll also suggested long-dollar positions are likely to stay largely intact through end-August, reflecting support from a relatively strong U.S. economy and expectations the Federal Reserve may need to raise rates sooner rather than later to contain inflation pressures tied to the U.S.-Israeli war with Iran.