Global IBs predict a strong dollar and a weak yen

Global investment banks forecast a weak dollar and a strong yen. It is opposite to their previous predictions.

Korea Center for International Finance and Bloomberg said on Sunday that Goldman Sachs lowered its previous forecast of 105 yen per dollar to 98 yen per dollar for the next three months on Friday. Credit Suisse also significantly reduced the forecast from 105 yen to 95 yen on Oct. 2.

Most major global investment banks expected that yen would comfortably exceed 100 yen per dollar by the end of the year as a weak yen continued until May since the launch of Japan’s Shinzo Abe administration in Dec. last year. Korea Center for International Finance found 14 investment banks predicted 102.29 yen for the next three months as of Oct. 7, which is lower than the average of 103.37 yen per dollar as of Sept. 23. Bloomberg found the median estimate by 76 financial companies for the fourth quarter of this year fell from 103 yen a month ago to 101 yen on Friday.

The yen-dollar exchange rate once plummeted to 94 yen per dollar as Japan did not provide additional economic stimulus measures, while the U.S. began considering tapering off quantitative easing from the second quarter. In response, investment banks seem to have adjusted their prediction.

Goldman Sachs said in its report, “We lowered the yen-dollar exchange rate prediction because Prime Minister Abe’s economic stimulus measures were less effective than expected.” In addition, a weak yen prediction seems to be weakening due to the prediction that the U.S. Federal Reserve might delay an exit strategy as a result of a U.S. federal government shutdown and the debt ceiling issue.