“We are probably approaching peak yen weakness to the dollar,” said Sébastien Page, head of global multi-asset at T. Rowe, which oversees US$1.28 trillion in assets. When the Fed finally pauses on hiking, “there is room for the Bank of Japan to surprise the market by being a bit more aggressive” on policy and boost the currency.
The world’s worst-performing major currency looks poised for an impressive turnaround in 2023 as its two key drivers – a hawkish Federal Reserve and a dovish Bank of Japan – swap places in the eyes of some investors.
The yen – a favored short against the dollar for a majority of this year – could rally more than 9% from current levels next year, according to Barclays Plc and Nomura Holdings Inc., while Vontobel Asset Management AG said fair value is below 100 per dollar – over 35% stronger. State Street Global Markets sees a quick snap back as fears of aggressive US interest rate hikes recede, while T. Rowe Price said there’s scope for gains on a more hawkish BOJ.
