Deutsche Bank's call for a stronger Japanese yen along with a weaker euro and sterling at the end of May helped it narrowly win the top spot for accuracy in the May Reuters foreign exchange poll.
May was a particularly difficult month for forecasting currency moves. While most of the 57 strategists in the survey had predicted a weaker euro, none saw the single currency fall as sharply as it did, by nearly seven percent to $1.236.
The euro zone debt crisis flared up with chances of Greece exiting the monetary bloc rising and increased worries about Spain's banks. Sterling, too, slid over five percent against the dollar in May as weak economic data increased the chances the Bank of England would expand its bond purchase programme from the 325 billion pounds it has already spent.
Deutsche Bank had forecast the euro to end May at $1.29, sterling at $1.57, and the Japanese yen at 78 per dollar, compared with their actual closes of $1.24, $1.54 and 78.4 respectively.
"The euro was very range bound for a period which prompted some complacency" amongst forecasters, said Geroge Saravelos, foreign exchange strategist at Deutsche Bank.
"We were looking for this decline (in the euro) to current levels by the end of the second quarter and we're subsequently looking for an improvement from here on." But he noted that their current forecasts were based on the view that there would not be any 'systemic' event in the euro zone arising from Greece or Spain.
The latest Reuters survey showed the euro trading roughly where it is now in a year, suggesting reluctance among strategists to take too bearish a call even with the debt crisis threatening to spin out of control. The fortunes of Greece, widely perceived as the most likely member country to leave the bloc, hinge on the outcome of national elections due later this month.
If the anti-austerity political bloc in Greece were to gain majority power and stray from the austerity path imposed by international creditors, it could lead to the bailout taps being shut off, leaving the indebted nation no choice but to default on its debt and leave the eurozone.
Spain, on the other hand, has domestic banks which need fresh capital to stay afloat, after real estate market bets went sour after a 30 percent property price crash.
Differentials in yields, or the reward one gets for holding a country's debt over others, has historically been the primary driver of currencies. But with yields on US, British and German debt at historical lows Saravelos says that is no longer the case. "The interesting thing this year is we're seeing drivers of currencies rotate pretty quickly. So at the start of the year, the level of yield helped some currencies perform well but we're currently in a regime where safe-haven aspects are doing well among major currencies," Saravelos added. Bank of Tokyo-Mitsubishi topped the year-to-date league last month, followed by UniCredit and Swedbank.
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