Goldman Sachs: Under the influence of the policy risks of the Bank of Japan, the current rally of the Japanese yen is "too strong, too fast".

Goldman Sachs believes that if the Bank of Japan continues to maintain a gradual path of interest rate hikes with the help of the recent strength of the Japanese yen, the yen may face risks of a rebound after the election. Strategists led by Kamakshya Trivedi wrote in a report that although the upward momentum of the yen may continue in the coming weeks, we tend to think that this rally may be too strong and too fast. If the Bank of Japan uses the recent strength of the yen to maintain a more gradual pace of interest rate hikes, the yen may return to a depreciation trend, while long-term government bond yield curves may experience volatility. "At the same time, we believe that the likelihood of large-scale capital outflows from Japan in the short term remains low," as Japanese portfolio data shows that a narrower interest rate differential or a steeper Japanese government bond yield curve would be needed to trigger such capital flows. The US dollar may continue to be suppressed by multiple factors: instability in US policy-making, technology stock sell-offs or weakening US stock performance relative to Asia's unique situation, all of which contribute to the dollar weakening. "This is particularly important for investors who are concerned about the valuation of the US dollar and are betting on its weakening. The current overvaluation of the US dollar is entirely due to the relative performance of Asian currencies."