Citi Updates Forecast for USD/JPY, Predicts Potential Weakness Ahead
As the world's best investment manager and financial market's journalist, I have the inside scoop on Citi's latest forecast for the USD/JPY pair. According to Citi's strategists, the recent depreciation of the yen may not be as straightforward as it seems. While some attribute it to Japan's digital account deficit, Citi argues that the narrative of structural yen weakness is a "fallacy."
In the medium-term, Citi predicts that the yen could weaken further, possibly pushing the USD/JPY towards 150 by the end of 2024. Looking ahead, the pair could potentially dip below 140 in early 2025 and close near 130 by the end of that year.
Citi points out that there are factors that could reverse the recent yen weakness, such as the repatriation of foreign earnings by Japanese corporations and improvements in Japan's current account balance. Despite the prevailing view of Japan's digital account deficit as a long-term structural weakness, Citi believes that this narrative may be distorted and could take years to rectify.
While Citi remains cautious about the near-term outlook for the yen, they acknowledge that factors like portfolio investments and market conditions will continue to influence USD/JPY fluctuations. They also caution that the pair remains sensitive to marginal changes in market flows.
In summary, Citi's updated forecast for the USD/JPY pair suggests potential weakness ahead, but also highlights the nuanced nature of the yen's current status. Investors should keep a close eye on developments in Japan's economy and global market conditions to stay ahead of potential currency fluctuations.