BLOOMBERG – The yen may strengthen to 90 per dollar within six months of Donald Trump’s election, former Japanese top currency official Eisuke Sakakibara said.
“Trump’s ‘America first’ stance means weak dollar policies,” the 75-year-old professor, dubbed “Mr. Yen” for his ability to influence the exchange rate in the 1990s, said Thursday. “Gradual dollar weakness and yen strength are going to continue.”
Sakakibara, who accurately predicted the currency’s advance this year from near 120 per dollar to beyond 100 for the first time since 2013, said the yen’s decline to a three-month low followed Trump’s toned-down rhetoric rather than a change in trends. The yen swung to a 0.5 percent loss against the dollar Wednesday from a surge of as much as 3.9 percent, the most since June’s Brexit referendum result, after a conciliatory victory speech.
The president-elect campaigned on a policy platform with protectionism at its center, including threats to tear up trade agreements and impose tariffs that could slow Asian economies and send Japanese investors rushing back into domestic assets.
Even so, Trump’s proposals, including pledges to cut taxes and spend as much as $500 billion on infrastructure, are seen as inflationary and could lead to higher U.S. rates that would support the dollar.
Sakakibara doesn’t expect increased fiscal stimulus to raise the U.S. debt level to beyond about 120 percent to 130 percent of gross domestic product, from around 105 percent currently, limiting any potential dollar strength. Instead, he says the yen could reach 100 by year-end.
The yen traded at 105.27 per dollar as of 2:59 p.m. in Tokyo from as strong as 101.20 Wednesday. It touched a 2½-year high of 99.02 on June 24, and is the best-performing developed-market currency in 2016, climbing 14 percent against the dollar.
Sakakibara was a rare yen bull at the start of the year, when the consensus forecast among analysts surveyed by Bloomberg was for the currency to weaken to 125 by year-end. The median estimate is now 104.