Australia's Second-Largest Pension Fund Bets Big on Yen Strength
Australia's second-largest pension fund has made a significant bet on the strength of the Japanese yen, taking an overweight position in the currency despite its recent weakness. The Australian Retirement Trust (ART) manages around A$370 billion in savings and has been adding to this trade over the past six months as the yen fell towards 160 per dollar.
According to Jimmy Louca, a senior portfolio manager at ART, the market is underpricing Bank of Japan interest rate hikes. He believes that while higher energy prices are currently priced into the market, the odds of BOJ rate hikes look too low.
Louca sees scope for the central bank to raise rates next month and potentially signal two hikes before higher energy prices complicate its path. If they deliver on this, he thinks the market could move higher in terms of Japanese yields.