The yen continues to depreciate, with the Singapore dollar potentially reaching 130 yen against the Singapore dollar this year.

The yen continued to depreciate. The Singapore dollar was trading at 126.3 yen at the time of writing on Thursday (July 23). Earlier, the US dollar rose to 163.24 yen on Monday, while the yen fell to its lowest level since December 1986. Bloomberg, citing analysts, predicted that the US dollar could rise to 170 yen this year; if the Singapore dollar maintains its current exchange rate against the US dollar, it could break through 130 yen. The three institutions surveyed held differing views: Bloomberg Intelligence believes the yen may continue to weaken; OCBC Bank believes the yen is nearing a low against the Singapore dollar and has limited room for further decline; while Sumitomo Mitsui Banking Corporation expects the yen to rebound against the Singapore dollar.

Bloomberg reported last Friday (17th) that Vikram Murarka, founder and chief currency strategist of Kshitij Consultancy Services, predicts that carry trades will continue to put downward pressure on the yen, with 170 being a reasonable target for the year. Murarka had previously accurately predicted that the dollar would rise to 160 against the yen.

Bloomberg industry research is bearish on the yen, expecting limited declines for OCBC Bank. In an interview with Lianhe Zaobao, Zhang Chunyu, Asia FX and interest rate strategist at Bloomberg Intelligence, said that her team has been bearish on the yen since December last year and has consistently predicted that the yen would fall to a new low against the Singapore dollar. Based on the current market environment, the team believes that a rise in the Singapore dollar to yen exchange rate to 130-132 in the second half of this year is still a reasonable scenario.

In addition, the research team also holds a positive view on the medium- to long-term trend of the Singapore dollar, citing reasons such as the Singapore dollar's defensive characteristics, as well as Singapore's sound policy credibility, structural current account surplus, and healthy fiscal situation.

In contrast, OCBC Bank believes the yen is already near its lows against the Singapore dollar. The bank forecasts the Singapore dollar to trade at 126 yen in both September and the end of this year , and between 127 and 128 yen from March to September next year. In other words, even if the yen weakens further, the magnitude will be relatively limited.

Sumitomo Mitsui expects the yen to appreciate, but downside risks remain. Sumitomo Mitsui Banking Corporation, however, held a different view, expecting the yen to appreciate against the Singapore dollar. The bank forecasts the Singapore dollar to yen will reach 124 in three months, and further decline to 122 by the end of the year.

However, Sumitomo Mitsui Banking Corporation has not completely ruled out the possibility that the Singapore dollar could rise to 130 yen against the Japanese yen.

The bank noted that the yen still faces several downside risks. A further deterioration in the Middle East situation would increase oil price pressure on the currencies of energy-importing countries like the yen; and expectations of further US interest rate hikes could also push up the dollar. However, they also pointed out that this risk does not only put pressure on the yen.

Furthermore, the Bank of Japan's slow pace of interest rate hikes continues to make the yen a funding currency for carry trades. Nevertheless, Sumitomo Mitsui Banking Corporation believes that the Japanese government and central bank will not allow the yen to depreciate significantly further; therefore, a break above 130 yen to SGD is not their baseline scenario.

Source: [Lianhe Zaobao] (https://www.zaobao.com/finance/world/story20260723-9408407)