Strategists led by Kamakshya Trivedi at Goldman Sachs have indicated in their latest research note that the room for yen appreciation is constrained, as market expectations for rate hikes by the Bank of Japan continue to diminish.

The recent strength of the yen has been driven by market bets on a more substantial policy shift from the central bank. However, with visible disagreements emerging among the nominated members of the BOJ's board, investors are beginning to question whether the yen can sustain its upward momentum.

BOJ Governor Kazuo Ueda has signaled that the threshold for an October rate increase remains notably high, which has subsequently lowered market expectations for any near-term monetary tightening. The strategists caution that if market pricing for BOJ rate hikes turns more dovish, the yen could face further depreciation.

Given persistent global interest rate pressures and the slow pace of Japanese investors reallocating funds into domestic assets, the firm expresses a stronger preference for long positions in the yen against the euro rather than against the US dollar.