The dollar will hold firm over the coming months even after Tokyo and Washington's coordinated yen intervention, a new Reuters poll of FX strategists finds. Respondents say the move alone won't reverse the yen's slide unless the Bank of Japan raises rates, while a separate analysis shows emerging-market carry trades absorbed the shock with barely a dent.
The dollar will hold firm over the coming months before weakening later this year, according to strategists surveyed by Reuters between July 31 and August 5. Tokyo and Washington carried out the first coordinated yen intervention since 1998 in early August. The yen rallied about 4% against the dollar but failed to reclaim a peak set during Japan's previous intervention in May.
Intervention alone won't be enough
Nearly 95% of the poll's roughly 60 respondents said future intervention alone would not sustainably curb the yen's weakness, and nearly all of them said the Bank of Japan would need to raise interest rates for any lasting effect. The BOJ has been reluctant to raise borrowing costs quicker than once every six months, partly because of a weak economy, though futures markets now point to another increase in October following June's hike to 1%.
Weakest yen forecasts since 1993
Median forecasts show the yen, trading at around 158 per dollar, weakening to 159 in three months before gaining to 157 in six months and 154 in a year as the dollar declines. The three- and six-month medians were upgraded from 158.5 and 156 per dollar — the weakest consensus yen forecasts since Reuters began polling in 1993. The yen is down around 1% against the dollar this year and roughly 30% since early 2022, despite several rounds of intervention over that period.
Kit Juckes, chief FX strategist at Societe Generale, said the dollar's underlying strength should hold as long as the U.S. economy stays strong, adding: "we're either going to be range-bound or go another leg higher".
Carry trades shrug off the shock
A separate analysis found the intervention barely dented emerging-market carry trades, where investors borrow cheaply in one currency to fund higher-yielding bets elsewhere. The Bloomberg EM FX Carry Risk Premia Index fell roughly 1% in the aftermath. That compares with a 4% drop after the August 2024 yen rally, which forced a messy unwind of carry positions. Traders have increasingly shifted to the euro and Swiss franc as funding currencies, spreading the risk across pairs rather than concentrating it in yen.
The diversification has cut the direct link between yen intervention and emerging-market asset prices, turning what once triggered a cascading liquidation into a contained, manageable pullback.
Sources: Investing.com/Reuters, Crypto Briefing
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