The strategist predicts that the U.S. dollar will experience a significant decline in value against the Japanese yen.

• Geoffrey Yu, a senior EMEA market strategist at BNY Mellon, stated on Wednesday that the U.S. dollar is predicted to remain weak against several significant currencies until the year's end.
• On Wednesday, market participants anticipate the release of preliminary revisions to U.S. labor data, following another day of dollar selling on Tuesday. His comments will follow.
• The carry trade is unwinding as the yen has risen sharply in recent weeks.

One market strategist predicts that the US dollar is likely to decline further against the Japanese yen in the coming months, especially since the "carry trade" backed by the yen has significant potential for growth.

Geoffrey Yu, a senior EMEA market strategist at BNY Mellon, stated on CNBC's "Street Signs Europe" on Wednesday that the dollar is predicted to remain weak against several major currencies until the end of the year.

On Wednesday, market participants anticipate the release of preliminary revisions to U.S. labor data, which could pose a "downside risk" to the dollar, as per analysts at Dutch bank ING.

The dollar was trading 0.6% higher at 146.09 yen at around 11:50 a.m. London time on Wednesday, following a brief dip below the closely watched 145 yen level for the first time since Jan. 6, Reuters reported. The yen has risen sharply in recent weeks, indicating a sustained unwinding in the carry trade.

Operations where an investor borrows in a low-interest-rate currency and reinvest the proceeds in higher-yielding assets elsewhere are known as carry trades.

Recently, the foreign exchange strategy has gained popularity among investors, who anticipated the Japanese yen to remain undervalued and for Japanese interest rates to remain low.

What is the potential range for the U.S. dollar to fall against other currencies? Yu responded, "It depends on the currency you're comparing it to. For example, the dollar-yen exchange rate is currently at 130 yen. However, there is still more downside potential."

Our data shows that the yen is still underheld, while the euro-dollar exchange rate of $1.05 is more reasonable, although still aggressive. As data turns negative, my target for year-end is to achieve this exchange rate.

The PBOC needs to ease monetary policy, which is likely to cause the rate of the dollar against the Chinese yuan to tick higher, as stated by Yu.

He stated that he expected the dollar to outperform against higher yielding currencies, such as the Mexican peso, despite the general belief that it would underperform.

What next for the yen carry trade?

The carry trade, which is funded by the yen, began to unwind aggressively earlier this month due to interest rate hikes from the Bank of Japan, which strengthened the yen and caused a dramatic sell-off in global markets.

Since then, strategists have cautioned investors about the unraveling of carry trades, warning that the unwind is not yet complete.

BNY Mellon's Yu echoed this view on Wednesday.

Despite the decrease in yen cash demand and liquidity demand, we still observe a considerable amount of underheld short yen positions among our data, particularly from the cross-border community, according to Yu.

If the Fed path is reflected in the price, and the Japanese government is changed, we will set out policy in the medium term in dollar-yen. This could lead to further unwinding, but not as violently as we saw two weeks ago.