FX strategists polled between July 31 and August 5 see the U.S. dollar retaining strength in the near term before easing later on, and their median yen forecasts were among the weakest recorded in the poll's history. The survey, which collected responses from roughly 60 market participants, found broad skepticism that future Japanese currency interventions by themselves will sustainably reverse the yen's weakness.
Recent interventions from Tokyo, including coordinated action with Washington, helped lift the yen by about 4% against the dollar, but that move did not reclaim the previous peak established after Japan's May intervention. Nearly 95% of respondents in the survey said that interventions alone would not be sufficient to arrest the yen's decline on a lasting basis. The majority of those respondents also flagged that a durable appreciation of the yen would require the Bank of Japan to raise interest rates.
So far, the BOJ has shown reluctance to accelerate its tightening cycle faster than roughly one hike every six months, a stance influenced in part by a weak domestic economy. Still, interest rate futures reflected expectations for another BOJ rate increase in October following the June move that lifted rates to 1%.
With the U.S. economy performing relatively well, survey participants noted that the Federal Reserve may need to raise interest rates sooner rather than later to counter inflation pressures linked to the U.S.-Israeli war with Iran. That dynamic supports the view that the roughly 2% increase in the dollar this year may persist for some time.
On the euro, the poll's median path showed the common currency holding around $1.15 over the next three months, strengthening to about $1.16 by the end of January and to $1.18 in a year's time.
There was also a notable shift away from earlier expectations of steeper dollar declines. Nearly half of respondents - 25 of 53 - expected current long-dollar positions to be little changed by the end of August, while 22 saw those positions decreasing and six anticipated a further increase.
"I still have an underlying view the dollar will remain strong as long as the U.S. economy remains strong. But I don’t think it’s going to go dramatic distances - we’re either going to be range-bound or go another leg higher depending on how the incoming economic data turn out," said Kit Juckes, chief FX strategist at Societe Generale. He noted that, left to market forces, the yen looks cheap on many measures because a weak domestic economy and relatively low interest rates undermine it, alongside longer-term concerns about debt and population trends.
Median forecasts for dollar/yen put the pair at about 159 in three months - from a current trading level near 158 per dollar - then improving to 157 in six months and 154 in a year as the dollar gradually softens. The three- and six-month dollar/yen medians were revised up from prior levels of 158.5 and 156 respectively, marking the weakest consensus on the yen since this poll began in 1993.
The yen has fallen roughly 1% against the dollar so far this year and about 30% since early 2022 despite several rounds of intervention during that span. Market veterans in the poll emphasized the typically transient effect of such operations.
"Intervention ... can be effective in slowing the pace of depreciation, reducing excessive market moves and providing short-term support, but history suggests without a change in the underlying fundamentals, its impact fades relatively quickly," said Ales Koutny, head of international rates at Vanguard.
Koutny added that a durable recovery in the yen would likely require either a more hawkish BOJ, a meaningful narrowing in U.S.-Japan rate differentials, lower energy prices or a broader slowdown that encouraged Japanese investors to repatriate capital.
Derek Halpenny, head of global markets research EMEA at Mitsubishi UFJ Financial Group, concurred that intervention seems unlikely to be repeated on the same scale. "Intervention is probably done. I don’t think the U.S. will be coming in again ... it is a significant development and I think it limits the appetite for buying dollar/yen to a much greater extent than in previous episodes of intervention when it was only Japan intervening," he said.
In short, strategists see the recent Tokyo-Washington action as helpful for stabilizing the yen in the short run, but they largely expect the currency to resume weakening unless underlying policy and economic conditions change. That view underpins the consensus that the dollar will remain supported into the near term even as some softening is projected further out.
Methodology note: The findings summarized here reflect the aggregated views of FX strategists who participated in the July 31-August 5 survey. When respondents were divided, the article reports the prevailing median and the distribution of views on key questions such as short-term currency trajectories and positioning expectations.