Bank of America: The yen is expected to resume its decline against the dollar and fall below 150 before the end of the year

Bank of America strategists stick with their forecast that the yen will resume its decline by the end of the year, predicting that the yen will fall below 150 against the dollar. Shusuke Yamada, the bank's chief Japanese foreign exchange/rate strategist, said in a report that the yen may resume its decline because the market is over-pricing the potential rate cuts of the Federal Reserve and exaggerating the prospect of capital flowing back to Japan due to the narrowing of the dollar/yen interest rate gap. Money market pricing shows that the Federal Reserve is expected to cut interest rates by more than 100 basis points this year, while Bank of America economists expect the Federal Reserve to cut interest rates by 25 basis points each three times. The bank slightly lowered its year-end dollar/yen forecast from 155 to 151. Yamada said that since the 1990s, the Fed's rate cuts have not always been unfavorable to the dollar/yen. "The only time the dollar/yen fell sharply was during the Fed's rate cut cycle in 2007-2008, when the global financial crisis led to the unwinding of yen carry trades and a sharp strengthening of the yen." Although the U.S. job market has cooled recently, the risk of a continued decline in the U.S. balance sheet and a hard landing of the economy remains limited. (Jinshi)