Citi analysts predict a long-term decline in the US dollar against the Japanese yen after the US midterm elections. In the short term, risks of yen weakening remain due to a number of factors.
Citi bank analysts believe that after the completion of the US midterm elections, the US dollar exchange rate will decline in the long term against the Japanese yen. At the same time, risks of yen weakening remain in the near future.
The bank noted that the key factors in the coming months will be the dynamics of US stock indices after the elections, geopolitical risks and the situation around Iran. Oil prices also influence the economic policy conducted by US Treasury Secretary Scott Bessent.
Citi specialists do not expect changes in the policy of Japanese authorities aimed at supporting the yen. According to their assessment, a new round of currency interventions to buy yen may begin if the USD/JPY pair tests the level of 160 yen per dollar. During such interventions, the authorities will likely seek to lower the rate below the mark of 155 yen per dollar.
Citi emphasized that the risk of yen weakening will persist in the short and medium term. Despite this, after the US elections, the USD/JPY pair should form a clearly expressed downward trend in the long term.
Bank analysts believe that the geopolitical situation and stock market movements will determine short-term exchange rate fluctuations. At the same time, the long-term forecast remains negative for the dollar against the yen.
Thus, according to Citi, after the US elections, the USD/JPY pair will move to a steady decline, although volatility spikes are possible in the near future.