BofA Cuts Dollar-Yen Year-End Forecast to 149 on Expected US-Japan Intervention
Forecast Trend Report by Period
Bank of America lowered its year-end forecast for the dollar-yen exchange rate, citing the prospect of joint foreign-exchange intervention by the US and Japan and the possibility of another Bank of Japan rate hike.
Bloomberg reported on August 5 that BofA expects the dollar-yen rate to fall to 149 by year-end, strengthening the Japanese currency. That compares with its previous forecast of 152 yen per dollar. The pair is currently trading at about 158 yen.
BofA said joint intervention by the US and Japanese governments to buy yen, together with an additional BOJ rate increase, would support the currency. The bank added that a BOJ move in September rather than October would send a stronger signal to markets of its determination to tackle inflation.
"The odds of successfully defending the yen have increased with this joint intervention, and that will require not only foreign-exchange intervention but also macroeconomic policy steps such as interest-rate hikes," BofA said.
US participation in the intervention also effectively removes a previous constraint, under which the size of Japan's foreign-exchange reserves helped determine the limit of any market operation.
BofA also revised its third-quarter dollar-yen forecast to 153 from 154. It added that US-Japan coordination appears to reflect a shared goal of long-term yen stability, rather than merely short-term support for the exchange rate.
