Goldman Sees Yen Strength as More Than Just a Short-Term Move

The yen's ascent continues, with USD/JPY falling from last week's high of 160.39 to an overnight low of 152.89. Goldman Sachs believes that the recent strengthening of the Japanese currency may be more than just a short-term move.

According to Goldman Delta One head Rich Privorotsky, the yen's rise is connected to the unusual weakness in US mega-cap equities and the potential for yen-funded carry positions to quietly diffuse out of the system. This could lead to a medium-term move towards 140 if Japanese retail investors and life insurers follow the suspected repatriation flow.

The market still questions whether the yen shift is genuinely structural, with front-end volatility surging while forward volatility remains near three-year lows. Client demand remains concentrated in yen upside, with little appetite to fade the move compared to the July intervention episode.