Forex Flash: Adding long USD/JPY to our Asia FX portfolio - Nomura

FXstreet.com (Barcelona) - Nomura strategists Craig Chan and Wee Choon Teo have decided to add a long USD/JPY position to their Asia FX portfolio.

They note that the positive surprise from the BoJ announcement yesterday exceeded elevated market expectations and markets reacted forcefully. They comment that their G10 FX Strategy team expects JPY to weaken further against major currencies in the medium term, as domestic asset managers start to shift in the new fiscal year, and on the back of unprecedented policy aggressiveness by the BoJ. They feel that given the much lower level of nominal JGB yields, and the gradual pick up in inflation expectations, it is natural to assume a push into other asset classes by institutional managers. They write, “The sharp JPY depreciation has hit our short S$NEER recommendation given the
relative SGD appreciation. As such, we recommend adding a long USD/JPY position to our Asia FX portfolio to neutralize the effect of further JPY weakness on the S$NEER basket.”