Rothschild Sees Yen Rally as Correction to Undervaluation

The yen has started to trade more on its own fundamentals after years of being driven by US-Japan rate differentials and its role as a funding currency for global carry trades, according to Edmond de Rothschild Asset Management.

The Japanese currency's recent rally marks the beginning of a broader correction in its long-running undervaluation, says Michael Nizard, head of multi-asset and overlay at Edmond de Rothschild Asset Management. In a note, he writes that the yen is starting to trade more on its own fundamentals.

This shift means investors should buy the yen when it dips, according to Nizard's analysis.