ART Bets Big on Yen as Rate Hikes Loom

Australia's second-largest pension fund, Australian Retirement Trust (ART), has built its largest 'overweight' position in the Japanese yen in years.

The move is a rare bullish bet on the yen when many investors are looking to sell it. The currency hit a 40-year low last month as traders bet the Bank of Japan will be slow to raise rates while energy costs stay elevated.

Jimmy Louca, a senior portfolio manager at ART, believes the market only got part of it right, the drag from higher energy prices is priced in, but the odds of BoJ rate hikes look too low. 'Any reversion in those two factors should support the yen,' he said.

The fund has spent the past six months adding to its trade as the yen weakened toward 160 per US dollar, funded partly by trimming its exposure to the greenback, which is now seen as overpriced.