Bank of America analysts project the Japanese yen will not significantly benefit from U.S. dollar weakness in 2025, citing a slow increase in the U.S. dollar hedge ratio among Japanese institutions, persistent structural outflows, and unstable political conditions in Japan. The analysts also anticipate that the USD/JPY carry will remain stable. Consequently, BofA remains long on EUR/JPY and AUD/JPY currency pairs, reflecting their strategic positioning.
Bank of America (BofA) analysts project a subdued outlook for the Japanese yen (JPY) in 2025, anticipating it will not be a significant beneficiary of potential U.S. dollar (USD) weakness. This moderately negative view, reflected by a -0.6 sentiment score for the Invesco CurrencyShares Japanese Yen Trust (FXY), stems from several factors. BofA highlights that any increase in the USD hedge ratio among Japanese institutions is expected to be gradual and marginal, limiting JPY support. Furthermore, persistent structural outflows from Japan are anticipated to continue exerting downward pressure on the currency. Unstable political conditions within Japan, as detailed in their "Japan Rates and FX Watch: Yen’s summer risk" report dated May 14, 2025, are also cited as a headwind. Compounding these concerns, BofA suggests the USD/JPY carry trade is unlikely to decline, further diminishing the yen's relative attractiveness. Consequently, BofA maintains a strategic long position on the EUR/JPY and AUD/JPY currency pairs, a stance outlined in their "Liquid Insight: Case for a higher EUR/JPY" report from April 22, 2025, indicating a preference for yen weakness against these specific currencies rather than broad strength.
AI-powered research, real-time alerts, and portfolio analytics for institutional investors.
Request a DemoOverall Sentiment
moderately negative
Sentiment Score
-0.50
Ticker Sentiment
