Bank of New York: Yen may take Months to regain its fair Value
Sudan Events – Agencies
A report issued by Bank of New York expected that the Japanese yen will continue to decline for weeks, before starting a recovery journey that may last months to reach 100 yen against the dollar over time, compared to its current level of 147 yen against the dollar, indicating that it needs several months to reach its fair value.
Bloomberg News Agency quoted the bank’s head of market strategy, Bob Savage, as saying that investors are still pessimistic about the yen, and that short-term positions will continue to shrink, noting that the yen appears very cheap at its current level of 147 yen to the dollar, and that its fair value over time will be closer to 100 yen to the dollar.
He added that he expects the yen to continue to suffer in the coming weeks, if not months, before starting its recovery journey, indicating that the risks of further decline in its value are increasing with the continuation of its sharp fluctuations during the current month of August.
Late last month, the Bank of Japan announced a 15 basis point hike in its key interest rate and plans to scale back its purchases of Japanese Treasuries as part of its tight monetary policy.
The Monetary Policy Board voted 7-2 to raise the key rate to 0.25 percent, the BOJ said.
It also unanimously agreed to reduce the bank’s purchases of Japanese Treasuries to about 3 trillion yen per month by the first quarter of 2026.
The bank expects inflation to come in at 2.5 % in the current fiscal year ending March 31, compared with a forecast of 2.8 % in April, noting that the decline in inflation expectations is mainly due to government measures to reduce energy prices.
At the same time, the BOJ raised its inflation forecast for the next fiscal year to 2.1 % from 1.9 %, and maintained its forecast for the following year at 1.9 % annually.
