Dollar weakness can spark a longer-term recovery in many of the foreign currencies for which we expect a near-term decline, although we also believe the Japanese Yen can recover more than most over time.

For some time, higher US Treasury yields, a hawkish Fed and an accommodative Bank of Japan have weighed on the Japanese yen. Should the Fed indeed cut policy rates as we expect, and even if the BoJ continues to tighten monetary policy only very gradually, yield differentials should move in favor of the Japanese Yen over the longer term. As these dynamics unfold, we expect USD/JPY to push toward 146.00 by the end of next year.