Experts of the largest bank Morgan Stanley sharply worsened the forecast for the US dollar against the yen. The study concerns not only the current situation but as well as with what awaits on the situation next year. Strategists of the bank has stated what should be expected of the American and Japanese currencies in the short and long-term basis.
Currency experts at Morgan Stanley lowered their forecast for the dollar to yen rate from 108 to 102 at the end of 2019 and from 98 to 94 at the end of next year. At the same time, the bank's analysts added Japanese currency to the so-called "recommended portfolio". In this situation, experts at Morgan Stanley recommend buying the yen against the US dollar and the British pound.
In the recent months, the US dollar against the yen has been steadily falling amid a decline in real returns on US assets. According to analysts, it decreases faster than the profitability of European and Japanese assets. During Asian trading on Thursday, July 4, the US dollar depreciates against the yen and hardly changes in tandem with other currencies.
Paired with the Japanese currency, the euro fell to 121.51 yen compared with 121.76 yen on Tuesday. The US dollar exchange rate was 107.63 yen against 107.88 yen a day earlier. According to experts of another large financial company, Julius Baer, the deterioration of fundamental factors limits the possibility of growth of the American currency. These include the potential reduction in key rates by the Fed, which negates the benefits of the US dollar associated with monetary policy.
In the current situation, the experts of Julius Baer revised the forecast for the EUR / USD pair upwards, and for the USD / JPY pair - downward. The reason for this goes forth to the belief of the experts on the lack of potential for further growth by the US currency.
Morgan Stanley believes that the current situation is reminiscent of 2016, when inflation expectations shrank faster than nominal bond yields. At that time, the USD / JPY rate collapsed by 20%, which led to a serious imbalance in the economy, analysts remind.
