Goldman Sachs Group Inc. can’t catch a break from currency markets.

Less than two months after the bank softened its short-term euro forecast after a central-bank policy meeting, Goldman Sachs is doing the same with the yen. Japan’s currency is likely to strengthen until Bank of Japan Governor Haruhiko Kuroda rolls out or signals additional stimulus measures, analysts led by Robin Brooks, the bank’s chief currency strategist, wrote in a note to clients on Monday. That overtakes an April 24 call for the yen to weaken in coming months.

Goldman Sachs’s adjustments shows how unpredictable currency markets have been in 2016. Both the euro and the yen have jumped even as policy makers in Europe and Japan unveil further stimulus, while the dollar has posted its worst string of monthly losses in two years following the first Federal Reserve rate-increase in a decade. That’s challenged market consensus for a stronger greenback, prompting forecast revisions.

“Until Governor Kuroda is willing to grab the bull by the horns and confront market fears over the BOJ’s balance sheet, the path of least resistance for dollar-yen is down,” Brooks wrote. “Dollar-yen will ultimately go a lot higher. Just not in the short term.”

Brooks didn’t respond Monday to e-mail or phone call requests for further comment.

Goldman Sachs didn’t include a set target in its latest note. Reports published in April and March forecast a yen slide to 130 per dollar within the next year, and a euro decline to 95 cents during the same time period. The yen traded at 106.41 per dollar as of 5 p.m. in New York, while the euro closed at $1.1534.

The yen has climbed to an 18-month high since Japanese policy makers met last week. Officials opted to hold firm on monetary policy, thwarting Goldman Sachs’s expectations for further stimulus.

Goldman Sachs isn’t the only bank to be wrong-footed by market moves. All of more than 60 analysts surveyed by Bloomberg late last year saw the yen at 115 per dollar or weaker by the end of June.

The bank was similarly frustrated by the European Central Bank in March. While the ECB unveiled rate cuts and expanded quantitative easing, the euro jumped 1.6 percent, prompting Brooks to conclude in a note a day later “we don’t think risk-reward for euro downside is compelling in the near term.”

Source:
courtesy of BLOOMBERG

by Rachel Evans & Chiara Albanese

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