Strategists at Wells Fargo & Co. and Citigroup Inc. foresee a weakening of the Japanese Yen following the Bank of Japan's recent policy meeting. They anticipate that the BOJ will fall short of market expectations, adopting a less hawkish stance than investors are hoping for. This disappointment is expected to put downward pressure on the yen.
Citigroup specifically projects that the yen could depreciate to 159 per dollar in the coming weeks. As of early Friday in Tokyo, the yen was trading at around 156.02 per dollar, indicating that strategists are looking for a continued decline from current levels. The BOJ's decision, particularly the split vote, is seen as a bearish signal for the currency.
This outlook comes despite expectations that the BOJ is set to raise interest rates to a 31-year high of 1.25% from 1% to counter inflation risks, which are heightened by a weakening yen and rising oil prices. The Federal Reserve's recent rate hike and the prospect of further increases have also widened the US-Japan rate gap, adding pressure on the BOJ to act decisively to support the yen. However, strategists believe the BOJ's actions will not be aggressive enough to counteract these pressures effectively.
