Commerzbank Sees Gradual Yen Appreciation Amid Ongoing Weakness

Commerzbank's Volkmar Baur says that despite the Japanese Yen remaining historically weak, it is likely to appreciate gradually over the coming quarters. The bank has revised its projections slightly weaker JPY near term but still expects USD/JPY to fall toward 145 and EUR/JPY toward 175 by end-2027 as fundamentals and rate differentials improve. According to Baur, there are good reasons for the yen's weakness to persist for some time, but he remains convinced that economic developments should support a stronger Japanese Yen.

Baur notes that the market does not yet seem convinced of this, but a shift in sentiment could occur in the coming weeks. He also believes that a shift in interest rates by the Fed would weigh on the US dollar over the coming months. As a result, he expects the JPY to appreciate more strongly against the US dollar than against the euro in the coming months.