Mark Nash of Jupiter Asset Management has boosted his bets on the strength of the Japanese yen, based on his belief that Japan Bank will raise interest rates continuously until 2025, as buying the Japanese yen is its biggest bullish bet on currencies.
Nash, whose investment strategy in absolute yield bonds has outperformed nearly 90% of his peers over the past five years, bets on the yen’s strength are now the fund’s largest currency center, accounting for about 15% of the fund’s total risk. On Monday, Nash added to his bets on the yen’s strength, buying the currency against the Swiss franc, the Australian dollar and the New Zealand dollars.
Nash agrees with Vanguard and RBC BlueBay Asset Management that borrowing costs in Japan are likely to continue to rise, a forecast that stands out amid a sharp decline in market expectations for further monetary tightening this year. The expectation of the yen’s movement has become very crucial, as traders bet billions of dollars on the weakness of the currency, but were surprised by its significant rise in early August resulting in large losses.
Read also:Reuters survey: Economists expect Japan Bank to raise interest rates by the end of the year
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Hedge funds optimistic about yen
The popular investor sees room for the yen to rise to around 130 to the dollar as Bank Japan raises interest rates “to 1% at some point, maybe once a quarter over the next year.” The Japanese currency is now trading at around 145.18 per dollar on Wednesday morning.
Nash also increased his bets on a decline in Japanese government 10-year bonds to reflect his expectations of higher interest rates. At the same time, the analyst expressed optimism about Japan’s 30-year sovereign bond.
Nash believes that a large portion of the riskier deals that involved borrowing the yen to invest in higher-yielding assets are over. Data from the Commodity Futures Trading Commission showed that hedge funds, which were a major player in these trades, became upbeat towards the Japanese currency for the first time since 2021 in the week ending August 13.
“We believe things have changed now and we should not be drawn back into interest trading,” Nash added. “Japan’s monetary policy is in the wrong place, so it makes sense for the yen to rise again,” he said.
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