Citi sees dollar weakening against yen after U.S. midterms

Citi expects the U.S. dollar to weaken against the Japanese yen over the long term following the conclusion of U.S. midterm elections, though near-term risks of yen weakness remain.

The bank said the direction of U.S. equities after the elections, geopolitical risk, and crude oil prices linked to the situation in Iran will be key factors in the near term.

Crude prices also play an important role in the economic policy outlined by Treasury Secretary Scott Bessent, according to Citi.

The firm said it does not expect any change in Japanese authorities’ ongoing efforts to defend the yen. Citi anticipates the next round of intervention to buy the yen if the USD/JPY tests ¥160 per dollar.

The authorities are likely to attempt to push the currency pair below ¥155 per dollar during such intervention, Citi said.

The bank noted that the risk of yen weakness will continue in the short to medium term despite the expected long-term downtrend in the dollar-yen pair.

Citi said a clear downtrend in the USD/JPY is expected to emerge over the long term now that U.S. midterm elections have concluded.