Decade of Failure and Counting; Analysts Misread Yen, Aussie

  • Forecasts have missed by more than 12% on average since 2006
  • Goldman's botched euro call highlights potential for error

Market strategists are having a tough time picking where the yen and the Australian dollar are going.

The median year-end forecasts for those currencies against the U.S. dollar missed the mark by an average of at least 12 percent over the past decade, according to data compiled by Bloomberg. The analysts are on course for an 8 percent gap on their Aussie estimates in 2015.

“The yen is very difficult to predict because, on top of being one of the lowest-yielding currencies, it is bought when risk aversion is in play,” said Hideo Shimomura, chief fund manager at Mitsubishi UFJ Kokusai Asset Management. “It’s also difficult to come up with forecasts for a high-yielding currency like the Aussie because its volatility is higher.”

One-month implied volatility in the Aussie versus the greenback soared as high as 16 percent in February of this year, the most since 2011, amid a rout in commodity markets. The median year-end estimate for the currency was 80 U.S. cents on Jan. 1, compared with 73.26 as of 7:47 a.m. in London on Friday.

Forecasters have fared better with the yen in 2015, as the currency got stuck in a 10-yen range of 115.86-125.86, the narrowest on record. They predicted a drop to 125 from around 120 at the start of the year, with the yen recently trading at 122.77.

Among the currencies where strategists have historically had more success is the euro, missing by a relatively small 5.8 percent since 2006. But the potential for error was highlighted this week in a call by one of Wall Street’s most prominent names.

Goldman Sachs Group Inc.’s Chief Currency Strategist Robin Brooks predicted the euro would plunge as much as 3 percent against the dollar in one day, anticipating a “dovish surprise” from European Central Bank President Mario Draghi on Thursday. Instead the currency surged 3.1 percent, the most since 2009, after Draghi delivered a stimulus package that was less aggressive than investors anticipated.

"We badly misread this meeting," Brooks, who’s putting his euro forecasts under review, wrote in a research note published that day. "Even in the unlikely event that today’s disappointment was a mistake, we think it has cost enough credibility that the euro-down story we had envisaged is now less likely to play out."

(An earlier version of this story was corrected to fix the date in the first deck headline.)

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