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Yen Drops to Lowest Level Since 1986

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Bloomberg Jun 26 09:57 · 48.7k Views

The yen tumbled to the weakest level since 1986, raising speculation authorities may act to support the currency again.

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Transcript

  • 00:00 The Japanese yen just weakened its lowest going back to 1986 versus the dollar.
  • 00:05 This has been an ongoing trend.
  • 00:06 This is not because of necessarily economic weakness, this is because of monetary policy, inflation, et cetera, et cetera.
  • 00:11 A lot of people have been bullish on Japan for a long time, including yourself.
  • 00:14 Does this make you less bullish to go in on a non currency hedged basis?
  • 00:19 Wow.
  • 00:20 I would observe that Japanese equity market is negatively correlated with the currency.
  • 00:26 So a weaker currency potentially can actually creates momentum for the exporters within the
  • 00:32 Japanese equity market.
  • 00:33 But we still think that over a longer term
  • 00:37 at this level we would still rather own it on a unhedged basis which is that our view at its juncture but obviously very, very volatile which is what we have seen so far.
  • 00:48 Yes, some a bank on
  • 00:50 intervention
  • 00:52 coming from the
  • 00:53 the the central authorities, but it's going to be very costly and so far it hasn't really worked.
  • 00:57 So I think volatility is what we should expect.
  • 01:00 But for Japan, Japan is actually one of the very few markets where macro is our friends.
  • 01:05 So here in the US we're talking about kind of tougher trade off given the persistent inflationary pressure central banks having to choose is the labor market is inflation.
  • 01:13 But in Japan, inflation is coming through in a gradual way, exiting decades long.
  • 01:19 Deflation reminds that
  • 01:21 stocking animal spirit earnings are getting upgraded and and companies are beating their earnings and the reforms are just getting started.
  • 01:27 So for all these fundamental reasons, we're overweight.
  • 01:31 The currency has been really
  • 01:32 somewhat inconvenient given the volatility that he has created.