Title: US Dollar to Japanese Yen Forecast: RBC Predicts Further Decline with Medium-Term Target at 133
Author: Adam Solomon
Source: Originally published at ExchangeRates.org.uk
Link: exchangerates.org.uk/news/43522/2025-07-13-us-dollar-to-yen-forecast-usd-has-further-to-fall-mediumterm-at-133-say-rbc.html
As of mid-July 2025, the foreign exchange (Forex) market is once again focusing its attention on a significant currency pair: the US Dollar (USD) versus the Japanese Yen (JPY). Analysts at RBC Capital Markets foresee a continued decline for the US Dollar relative to the Yen, driven by a complex interplay of global economic dynamics, central bank policy shifts, and broader market sentiment.
In its latest forecast, RBC outlines that USD/JPY is likely to slide further from its current levels. Their medium-term target for the currency pair is 133, indicating that the US Dollar is likely to continue weakening as market conditions evolve. Currently, the USD/JPY pair is trading above 146, down from highs around 160 seen just weeks earlier.
This significant outlook has important implications for investors, traders, importers, exporters, and policy-makers who are all influenced by the movement in this major currency pair.
Overview of the USD/JPY Outlook
RBC’s forecast implies a bearish sentiment on the medium-term prospects for the US Dollar against the Japanese Yen. Here are some of the major highlights of RBC’s analysis:
– RBC Capital Markets has set a medium-term forecast of 133 for the USD/JPY pair.
– The currency pair may continue trending downward due to macroeconomic and monetary policy forces.
– General market sentiment is no longer strongly supporting broad USD strength.
– The Federal Reserve is signaling a potential end to its hiking cycle, which tends to weaken the Dollar.
– In contrast, the Bank of Japan is slowly, though cautiously, shifting away from ultra-loose monetary policy.
Market Dynamics and Central Bank Divergence
Several key macroeconomic trends and monetary policy factors are guiding the USD/JPY trajectory:
1. Federal Reserve Policy
– The Federal Reserve has maintained a tightening bias through much of 2022-2024 to tackle high inflation. However, by 2025, inflationary pressures have eased considerably.
– As a result, markets are pricing in interest rate cuts or at least a pause in further hikes.
– Yield differentials, which previously supported USD strength against the Yen, are starting to narrow.
– RBC analysts view this shift in Fed policy as a turning point, one that undermines support for the Dollar.
2. Bank of Japan Policy Normalization
– For much of the last decade, the Bank of Japan (BoJ) led the world in implementing ultra-loose monetary policy, including negative interest rates and aggressive bond purchases.
– However, Japan’s inflation has recently risen above the BoJ’s 2 percent target for the first time in decades.
– In response, the BoJ has hinted at adjustments, with some modest tightening steps already taken.
– These signals, while tentative, have been sufficient to support the Yen, especially as the Dollar narrative weakens.
3. Dollar Sell-off Triggers
Analysts at RBC believe several developments could act as catalysts for further Dollar weakness:
– Continued softening in US economic data, including slower consumer spending and job creation.
– Shifting investor sentiment due to global risk redistribution, including a growing preference for undervalued and underleveraged currencies such as the Yen.
– A rebalancing in global portfolios as the end of the Fed’s tightening cycle prompts capital to reallocate toward non-USD assets.
Historical Patterns and Technical Factors
– The USD/JPY has experienced significant volatility in recent years, surging from the 102-105 region in early 2020s to as high as 160 in mid-2024.
– Some of this rise was triggered by aggressive rate hikes
Explore this further here: USD/JPY trading.