The world’s worst-performing major currency looks poised for an impressive turnaround in 2023 as its two key drivers — a hawkish U.S. Federal Reserve and dovish Bank of Japan — swap places in the eyes of some investors.

The yen — a favored short against the dollar for a majority of this year — could rally more than 7% from current levels next year, according to Barclays and Nomura Holdings, while Vontobel Asset Management said fair value is below ¥100 per dollar — over 30% stronger. State Street Global Markets sees a quick snap back as fears of aggressive U.S. interest rate hikes recede, while T. Rowe Price said there’s scope for gains on a more hawkish BOJ.

"We are probably approaching peak yen weakness to the dollar,” said Sebastien Page, head of global multiasset at T. Rowe, which oversees $1.28 trillion in assets. When the Fed finally pauses on hiking, "there is room for the Bank of Japan to surprise the market by being a bit more aggressive” on policy and boost the currency.