Global FX Trader Dollar Drift

Economics Research 18 September 2026 | 10:28PM BST

Our thoughts on USD, JPY, CNY, GBP, CHF, CEE FX, SEK, NJA FX, and Kamakshya Trivedi | KZT & NGN Goldman Sachs International n USD: Delivering stability. We think FX should remain in a low volatility regime Michael Cahill | under a range of likely economic scenarios. On the one hand, the Dollar should Goldman Sachs International be supported by solid US economic performance and bright prospective investment returns, and it is on the right side of the energy and carry themes that Danny Suwanapruti | we think are key to the current backdrop. On the other hand, negative Dollar Goldman Sachs (Singapore) Pte

impulses have come mostly on the policy side. We think this back-and-forth can Teresa Alves | continue. This week’s FOMC communication was more hawkish than we had Goldman Sachs International expected, which, together with the shifts in commodity prices and risk Karen Reichgott Fishman sentiment, allowed the Dollar to recover off the low end of the recent trading | range. And the Fed’s decision to hike with a hawkish delivery should ease some Goldman Sachs & Co. LLC

market concerns about a captive Committee that have at times weighed on the Stuart Jenkins | Dollar. That said, our economists do not expect the FOMC to shift their approach Goldman Sachs International to try to substantially tighten financial conditions in a way that would be clearly Victor Engel more supportive for the Dollar, and we expect that an under-delivery relative to | market pricing would weigh on the currency again, as it did at times over the Goldman Sachs International

summer. In addition, China’s continued firm currency management should help Lexi Kanter | contain broad Dollar moves, as it did to some extent this week (see CNY bullet). Goldman Sachs & Co. LLC

n JPY: The downside of high expectations. Growing speculation of a bigger policy shift in Japan, including faster BoJ rate hikes, fueled the Yen’s appreciation over the past couple months. However, the dissents against the rate hike from PM Takaichi’s BoJ Board nominees, Sato and Asada, raise fresh doubts for investors about a broader policy shift from the administration to support the currency. Moreover, Ueda’s comments in the press conference emphasized that the Bank does not feel behind the curve, suggesting a high bar for an October hike. That, combined with the global backdrop remaining a source of downward pressure on JPY—which should persist if the Fed hikes again in October as our economists expect—further reduces the case to be short USD/JPY tactically. We still see clearer long-term asymmetry in USD/JPY downside, which has been reinforced by the latest rally, for three reasons. First, elevated risk of intervention remains with a reported rate check by Japan in the hours following the BoJ press conference. Second, even faster BoJ hikes could still come if the data warrant it, though our economists’ baseline is a bit slower than what is currently priced.

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Third, there remain higher odds of shifting portfolio flows over time. In the near-term, though, we continue to prefer being long JPY vs EUR rather than outright USD/JPY, for a few reasons: the reduced sense of urgency at the September BoJ meeting, the likelihood that any meaningful reallocation towards domestic assets by Japanese investors who buy foreign assets largely unhedged will be a slower-moving process, and our baseline for consecutive hikes from the Fed. There are also no clear catalysts for nearer-term JPY strength without intervention or more news pointing to some portfolio shift, whether it be the International Transactions in Securities data next month (unlikely) or more signs of it being under discussion. The scope for longer-term catalysts to develop faster than expected, however, still argues in our view for holding some long JPY exposure—and at least being more neutral than bearish. Our risk-reversal-based positioning metric reflects a similar…