Investing.com – UBS revised its forecasts for this year, lowering expectations to 145 for both end-2025 and end-2026, down from previous estimates of 157 and 161, respectively.
This revision reflects growing confidence in the Bank of Japan’s (BOJ) ability to pursue further interest rate increases, consistent with UBS economists’ call for a 25 basis point escalate at the December 19 policy meeting.
“A major factor in this move was growing confidence in the BOJ’s ability to raise interest rates further,” UBS analysts noted, as the yen continued to outperform against the dollar.
UBS’s change in outlook on USDJPY is also in line with the bank’s broader views on foreign exchange trading. The company remains brief, expecting a decline to 151 by the end of 2025 and to 145 the following year.
In the broader G10 currency market, UBS has seen a period of stability in recent weeks, with the US dollar trading close to mid-November highs.
That placid continued despite President-elect Donald Trump’s social media announcements regarding tariffs. While markets initially viewed the proclamations as a negotiating tactic, UBS warned that the sentiment may be “short-lived.”
Additionally, political uncertainty in Europe, including a vote of no confidence in the French government, may weigh on the euro.
“We see potential for a larger and more sustained impact now than in June, given the weaker growth situation and the dovish overvaluation of the ECB,” UBS analysts explained. This situation supports their end-2025 target of 1.04.
