Yen Expected to Gain 7% Against the Dollar Amid US Recession Risks - Morgan Stanley
Investing.com – The Japanese yen could strengthen around 7% against the US dollar, according to a forecast by Morgan Stanley.
The forecast comes amid signs of a weakening US economy, coupled with the growing likelihood of a recession due to the recent tough reciprocal tariffs.
In a note on Friday, Morgan Stanley experts, including Koichi Sugisaki and David Adams, said that a weakening US economy could lead to a correction in the dollar, with the Japanese yen having a chance to rise. They propose two yen long trades with adjusted targets:
Sell USD/JPY at 146.40 with a target of 135, down from the previous target of 145, and stop at 151.
Sell CHF/JPY at 171.30 with a target of 160 and stop at 180.
Morgan Stanley's analysis team said that the growing concerns about US economic growth, especially after the announcement of strict reciprocal tariffs, could cause the market to start pricing in the risk of a recession in the world's largest economy. This would become more evident if economic data starts to show more signs of deterioration.
The strategists also highlighted that in recent weeks, there has been strong buying of the Japanese yen by Japanese investors, especially pension funds, as they make adjustments to their portfolios. This participation has helped the Japanese yen maintain stability and recover against the US dollar.
Japanese Yen Outlook in Current Market Context
Morgan Stanley economists believe that if the US Federal Reserve (Fed) final interest rate is only around 2.75% by the end of next year, USD/JPY could fall to 135, about 7% lower than the current level. This could lead to a strengthening of the Japanese yen, reflecting the weakness of the US dollar amid potential difficulties in the US economy.
Investment Opportunities in the Stock Market
With the market facing great volatility, many investors are looking for potential investment opportunities. Investing.com's ProPicks AI provides winning stock picks selected by advanced AI systems. In 2024, ProPicks AI has identified 2 stocks that are up more than 150%, along with 4 stocks that are up more than 30% and 3 others that are up more than 25%.
Explore potential investment opportunities, from Dow, S&P, technology to Mid Cap stocks, to find the best opportunities in the coming period.