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Bank of America Sees Near-Term Dollar Downside, Revises Yen and Canadian Dollar Forecasts
Bank of America has flagged potential upside risks for the euro and downside risks for the U.S. dollar in its near-term currency outlook, according to a recent analyst note. While the bank maintained most of its long-term dollar bilateral forecasts, it adjusted its outlook for several key currency pairs.
Euro and Dollar Outlook
BofA reiterated its existing price targets for the EUR/USD currency pair, signaling a path of gradual appreciation for the euro against the dollar. The bank's projections remain consistent for the coming quarters and years.
Key EUR/USD forecasts include:
- End of Q3 2026: 1.12
- Year-end 2026: 1.15
- End of 2027: 1.20
Revisions for Yen and Canadian Dollar
The bank made notable downward revisions to its forecasts for the U.S. dollar against both the Japanese yen and the Canadian dollar, citing distinct factors in each region.
AdJapanese Yen (USD/JPY)
Analysts lowered their USD/JPY forecast due to what they describe as "changing dynamics in Japan" and increasing risks of further coordinated intervention activity to support the yen. Bank of America noted it had published a detailed report on this topic, titled "FAQs on coordinated yen-buying intervention," on August 5, 2026.
Canadian Dollar (USD/CAD)
The firm also revised its USD/CAD outlook downward, projecting the pair to trade around the 1.40 level for the remainder of the year and into 2027. This adjustment reflects the bank's expectation that the Bank of Canada is more likely to keep its policy rate on hold for the medium term.
Market Context
These forecasts from a major financial institution suggest that currency markets may be influenced by diverging central bank policies and potential government actions in the coming months. The outlook points to a potentially weaker U.S. dollar environment, a key consideration for international investors and corporate treasuries managing foreign exchange exposure.
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