Yen hits 40-year low, Goldman projects 165 💴📉

Goldman Sachs has revised its forecast for the Japanese yen, now expecting the currency to weaken to 165 per dollar within a year, a more bearish projection than its previous 155 target and one of the gloomiest on Wall Street. The call comes as the yen has slumped to its weakest level against the dollar since 1986, making it one of 2026's worst-performing major currencies. Goldman also raised its near-term targets, projecting USD/JPY at 162 in three months and 163 in six months, up from 160 and 158, respectively. Strategist Karen Reichgott Fishman attributed the bearish outlook to higher-for-longer US yields, a low risk of US recession, Japanese fiscal pressure, and gradual BoJ hikes.

The bank also weighed in on the likelihood of official intervention. Japan's Ministry of Finance remains focused on the currency market, but Goldman expects any intervention to have a temporary effect. "In fact, we see no reason for the upward trend in USD/JPY to stop without an unexpected negative US growth shock or a BoJ pivot towards more aggressive policy tightening," Goldman said. Market positioning has reinforced the bearish view, with hedge funds pushing short yen bets to the highest level since 2017 last month, while traders assign about a 72% chance that the pair will reach 165 by June 2027, according to Bloomberg.

Goldman expects the dollar to stay firm, linking that view to the US artificial intelligence (AI) investment boom and energy supply strains. The bank trimmed its euro forecasts while striking a more optimistic tone on the Indian rupee and Colombia's peso, reflecting its broader view on relative monetary policy paths and global growth dynamics.