Goldman Sachs Prefers Yen vs Euro Over Dollar-Yen Amid Dovish Policy Fears

Goldman Sachs analysts are taking a nuanced view of the yen's potential for strengthening. They believe that being long the yen versus the euro is preferable to investing in the dollar-yen pair in the near term.

This preference stems from the assumption that if Japanese investors were to reallocate their domestic assets, it would be a slower-moving process due to foreign assets largely being unhedged.

Additionally, Goldman notes that there's room for the yen to weaken if Bank of Japan policy tightening assumptions become more dovish. This implies that any expectations for tighter monetary policy could lead to a decline in the yen's value.