emerging
Japanese Yen Resurgence
The Japanese yen is poised for appreciation due to shifting interest rate differentials, unwinding of short positions, and its undervalued status.
Timeframe
near-term
Categories
Subcategories
Impact areas
Detailed Analysis
The report maintains a high conviction overweight position on the Japanese yen. Despite large intra-year fluctuations, the yen remains at historically cheap levels. As the Bank of Japan tightens monetary policy and investors unwind short positions, the yen is expected to appreciate further. This trend is supported by improving macroeconomic tailwinds and the currency's undervalued status.
Context Signals
The yen is at its cheapest levels on a real basis since the 1970s.
The Bank of Japan is continuing to tighten monetary policy.
The report recommends underweighting the Swiss franc, New Zealand dollar, and euro to fund the yen position.
Edge
The yen's appreciation could create investment opportunities in Japanese assets.
The shifting currency landscape could impact the competitiveness of Japanese exports.
The unwinding of short yen positions could lead to increased volatility in currency markets.
