Barclays Cuts Dollar-Yen Estimates; U.S. Yields to Stay Low as Growth Slow

Barclays Bank Plc, the world’s third-biggest currency trader, cut its forecasts for the dollar against the yen over the next year after reducing its projections for U.S. yields.

The U.S. currency will weaken to 83 yen in one month, compared with a previous prediction of 90 yen, the London-based bank said in a research note yesterday. The greenback will trade at 87 yen in three months versus an earlier forecast of 94 yen, and will reach 92 yen in 12 months rather than its prior projection of 98 yen, according to the note.

“As dollar-yen is very sensitive to the U.S. yields and our bullish dollar-yen view was chiefly based on the U.S. yields forecast, we have lowered our forecasts for dollar-yen,” Masafumi Yamamoto, chief currency strategist in Tokyo at Barclays, wrote in the note.

The U.K. bank said in the note that it forecasts the yield on two-year Treasuries will be 0.7 percent at year-end, compared with a previous prediction of 1.4 percent, and the yield on 10- year Treasuries will be 3 percent at the end of December versus 3.85 percent before.

The dollar traded at 86.10 yen as of 10:59 a.m. in Tokyo, from 85.90 yen in New York yesterday, after falling to 84.73 yen on Aug. 11, the lowest level since July 1995. Two-year Treasury yields were at 0.54 percent and 10-year yields were at 2.74 percent, according to data compiled by Bloomberg.

Japanese authorities are stepping up rhetoric expressing concern about a stronger yen, and intervention to weaken the currency may occur “very soon,” Yamamoto wrote.