A banknote of Japanese yen is seen in this illustration picture taken June 15, 2022.
A banknote of Japanese yen is seen in this illustration picture taken June 15, 2022. Reuters / FLORENCE LO

The Japanese yen's rise against the U.S. dollar since mid-July is a temporary shift, nearly two-thirds of currency strategists in a Reuters poll said, despite looming uncertainties over the global economy that have curbed the U.S. currency's rally.

The yen was down as much as 17.5% against the dollar for the year just three weeks ago, at one point hitting a 24-year low of 139.38 per dollar. It then rallied 6.9% to 130.40 in two weeks before settling above that level.

It last traded around 134, remaining down about 14% for the year.

In the Aug. 1-3 poll of global currency analysts, 17 of 28 respondents, or 61%, said the yen's recent strength against the dollar would not last.

The yen was unlikely to rally over the short term, analysts said, as the Bank of Japan (BOJ) remained an outlier among global central banks by sticking to its ultra-easy monetary policy.

"The yen will stay weak whilst the BOJ maintains its YCC (yield-curve control) policy," said Tony Nyman at Informa Global Markets, referring to the central bank's framework to implicitly cap the 10-year Japanese government bond (JGB) yield at 0.25%.

This year's rise in U.S. Treasury yields has put upward pressure on benchmark 10-year JGB yields, sending the BOJ in a frenzy to protect its de facto yield cap with massive bond-buying that fuelled the yen's slide.

The BOJ has firmly rejected speculation about any adjustment to the YCC framework to allow benchmark yields move higher, which might take some pressure off the yen.

Even strategists who said the yen's recent appreciation is not temporary think the turnaround would be slow.

"The process of USD/JPY turning lower could take some time," said Jane Foley, head of FX strategy at Rabobank, who projected that the yen would eventually strengthen to 128 per dollar in the next 12 months.

The median three-month forecast of 54 currency specialists in the poll has the yen trading at 134.00 per dollar, a weaker projection than July's 133.00.

In six months' time, analysts projected the USD/JPY rate to stand at 131.33, the median forecast showed, little changed from July's 131.00.

Twelve of 52 respondents expected the yen to weaken again to 135 or below per dollar by end-January, while only four saw it strengthening to 125 or beyond.

(For other stories from the August Reuters foreign exchange poll: