Top currency forecaster expects Japanese yen to strengthen next year

Neil Parker, the top dollar-yen forecaster in Bloomberg's latest rankings, expects the Japanese currency to strengthen toward 147 per dollar next year as the interest-rate gap between Japan and the US narrows.

Forecast Views

Parker expects the yen to reach around 155 by the end of the year before appreciating further. His bullish outlook contrasts with Bloomberg's top forecaster from the previous quarter, who expects the currency to weaken to 170 next year. Parker predicts the Bank of Japan will raise its benchmark rate from 1.25% to between 2% and 2.25%. Meanwhile, he expects the Federal Reserve to raise rates once more in December before stopping around the 4.00% to 4.25% range. Japan's consumer price index excluding fresh food and energy rose 2.4% in September, and Parker notes that a pickup to 2.6% or higher could speed up the central bank's tightening.

Background

Parker is the head of economics and market strategy at foreign-exchange and payments firm TTT Moneycorp Limited, and he has tracked the yen for nearly three decades since beginning his career in 1995. The yen has averaged about 158 per dollar this year and touched 163.99 in July before authorities intervened. Parker also topped Bloomberg's euro-yen forecast rankings, aided by his bearish view on Europe's economy and aggressive interest rate cuts in the region.

Context

Currency forecasting often relies on comparing central bank interest rates, inflation data, and market expectations across different global economies. Changes in interest rates set by central banks like the Bank of Japan and the US Federal Reserve directly influence currency values by altering the returns on assets held in those currencies.