Historic weakness ends! Europe's largest asset manager bullish on the yen against the dollar, expecting it to rise to 140
Amundi SA expects that the historically weak Japanese yen will come to an end and rebound to the level of July 2023, possibly reaching 140 in the next 12 months. The narrowing of the yield spread between Japan and the United States, as well as the potential for a rate cut in the U.S., have provided an opportunity to establish a long position in the Japanese yen. The yen has recently risen, but due to volatility, it is advisable not to increase holdings significantly immediately. Hedge funds are bullish on the yen for the first time since 2021, and some asset management companies have also abandoned hedging against the yen
According to the Zhitong Finance and Economics APP, Amundi SA expects that with the end of the historic weakness of the Japanese yen, the yen will rebound to the level of July 2023.
Shinichiro Arie, Chief Investment Officer of the Japanese branch of this largest asset management company in Europe, stated that with the narrowing gap between Japanese and US yields, the yen may reach 140 against the US dollar in the next 12 months. He said, "We expect the yen to not weaken in the future."
Arie mentioned that the US may start cutting interest rates, providing an opportunity to establish long positions in the yen. He also mentioned that the Bank of Japan may raise interest rates again this year. However, due to the volatility of the yen, it is best not to immediately increase yen positions in large quantities.
On Monday, the yen rose by 1.7% against the US dollar to 145.19 at one point, before narrowing its gains. As of the time of writing on Tuesday, the yen was trading at 146.69 against the US dollar.
Amundi issued the above call as hedge funds, after the unwinding of arbitrage trades centered on the yen, have switched to a long yen position for the first time since 2021. First Eagle Investment Management LLC, which expects the Bank of Japan to raise interest rates again this year, has abandoned its hedge against the yen as it believes the interest rate differential has peaked. M&G Investment Management is still increasing its holdings in the yen