Morgan Stanley: If the Federal Reserve cuts interest rates, the Japanese yen may appreciate by nearly 10% in the coming months

Jinse Finance reported that strategists at Morgan Stanley stated that if the Federal Reserve cuts interest rates consecutively amid increasing signs of a slowdown in the US economy, the Japanese yen could appreciate by nearly 10% against the US dollar in the coming months. The strategists, including Matthew Hornbach, wrote that USD/JPY has currently deviated from its fair value, and if this relationship returns, the USD/JPY exchange rate will fall in the first quarter of 2026, as declining US Treasury yields may lower the fair value. They pointed out, "Meanwhile, Japan's fiscal policy is not particularly expansionary," and expect that as the US economy recovers in the second half of next year and demand for carry trades returns, the yen will once again face downward pressure. Morgan Stanley expects USD/JPY to fall to around 140 in the first quarter of 2026, then rebound to around 147 by the end of the year. (Golden Ten Data)