'Pick a number': Strategist says the U.S. dollar will drift much lower against the Japanese yen

The U.S. dollar is likely to continue to drift lower against the Japanese yen over the coming months, according to one market strategist, particularly as the yen-funded "carry trade" could have plenty of room to run.

Geoffrey Yu, senior EMEA market strategist at BNY, told CNBC's "Street Signs Europe" on Wednesday that dollar weakness was expected to persist against a number of major currencies through to the end of the year.

His comments come after another day of dollar selling on Tuesday, with market participants poised for the release of preliminary revisions to U.S. labor data on Wednesday. The figures could present a "downside risk" to the dollar, according to 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, shortly after dipping below the closely watched 145 yen level for the first time since Jan. 6, Reuters reported. The yen has risen sharply in recent weeks, pointing to a sustained unwinding in the carry trade.

Carry trades refer to operations wherein an investor borrows in a currency with low interest rates and reinvests the proceeds in higher-yielding assets elsewhere.

The foreign exchange strategy has been hugely popular in recent years, particularly as investors expected the Japanese yen to remain cheap and for Japanese interest rates to stay low.

Asked how much lower the U.S. dollar could go, Yu replied, "It depends on against what [currency]. Dollar-yen, you know, pick a number, right? So, we're happy to see it go on the 130 [yen] handle, at least heading towards year-end, so much more downside there."

He added, "[The] yen is actually still very underheld, according to our data. Euro-dollar, I think $1.05 is probably a more reasonable level,