Yen Falls to Near 40-Year Low, Firms Bet on Accelerated Interest-Rate Hike
The Japanese yen has fallen to a nearly 40-year low against the U.S. dollar, prompting Wall Street firms to bet on an accelerated interest-rate hike from the Bank of Japan.
Analysts at Société Générale and Natixis believe that persistently weak yen could prompt Governor Kazuo Ueda to adopt a more hawkish monetary policy stance in the coming months.
The depreciation of the yen is driving up import costs, further intensifying domestic inflationary pressures. Strategists Stephen Spratt and Reo Sakida of Société Générale recommend shorting 5-year Japanese government bonds and going long on 30-year Japanese government bonds, betting that the yield curve will continue to flatten.
Dayeon Hong, Asia-Pacific strategist at Natixis, recommends taking positions in two-year JPY interest-rate swap contracts to capitalize on further increases in Japan's short-term interest rates.