Mitsubishi UFJ Financial: After the yen hits a new low against the euro, there is still room for further decline

After the Japanese yen fell to a record low against the euro, Mitsubishi UFJ Financial Group (MUFG) believes that the yen's decline may continue into next year, as the euro is expected to outperform in the coming months. The euro/yen reached a historic high of 180.10 on Tuesday; MUFG forecasts that the euro/yen could rise to as high as 185 by mid-2026.

"We still maintain a bullish outlook on the euro against the dollar," said MUFG senior foreign exchange strategist Lee Hardman. The euro/dollar is expected to rise to $1.26 by the third quarter of 2026, as the Federal Reserve may take more aggressive rate-cutting actions after the successor to Chairman Jerome Powell is determined, putting pressure on the dollar.

With the increase in short interest on the yen, Hardman believes that the risk of a significant reversal is also rising if the market suddenly turns