Japanese Yen: Weak against US Dollar with limited upside – NBC

National Bank of Canada ’s (NBC) Stéfane Marion and Kyle Dahms highlight the Japanese Yen (JPY) trading near multi-decade lows around 161 per USD, even as long-end yield differentials move in Japan’s favour. They see stretched short yen positioning, rising intervention risk near 162–163, and gradual BoJ normalization limiting further weakness. Their forecast has USD/JPY easing to 158 by year-end and toward 155 by mid-2027.

Intervention risk caps yen losses

"The yen remains near multi-decade lows despite some improvement in long-end yield spreads. Cautious BoJ normalization and fiscal concerns continue to limit support, while intervention risk around the 162–163 area and crowded yen shorts make further yen weakness look less likely. A sustained yen recovery likely requires lower U.S. yields or a more forceful BoJ."

"Positioning makes the setup more asymmetric. Non-commercial speculative positions remain deeply short yen, leaving the currency vulnerable to a sharp squeeze if intervention, softer U.S. data or a more hawkish BoJ surprise forces investors to reduce carry exposure"

"We therefore see the yen as weak, but less likely to further slide. Our year-end target is 158 for USD/JPY, compared with 161 currently. The slight appreciation is also a view that further depreciation should be harder from here, given improving long-end differentials, stretched positioning and rising intervention risk."

"A move toward 155 by mid-2027 is realistic, but it likely requires more help from the U.S. side, either softer U.S. data, lower Treasury yields, or a clearer narrowing in front-end rate spreads."