Dollar Strength Set to Persist as Yen Interventions Fall Short

The US dollar is expected to retain its strength in the coming months before weakening later in the year, according to FX strategists surveyed by Reuters. Nearly 95% of respondents said future Japanese currency interventions alone would not sustainably curb the yen's weakness, and that the Bank of Japan would have to raise interest rates for a lasting impact.

The yen rallied about 4% against the dollar after recent interventions from Tokyo and Washington, but was unable to reclaim its peak from May. The median forecasts showed the yen weakening to 159/$ in three months before gaining to 157/$ in six and 154/$ in a year as the dollar declines.

The respondents also predicted that the euro would hold around $1.15 in the next three months before strengthening about 1% to $1.16 by end-January and to $1.18 in a year.