Long Yen Thesis
Do you guys think the Yen will ever pop off in the near future? I thought Long Yen would be the holy grail of FX trades but the various ways that this trade went sideways this year is making me doubt myself.
Thesis behind Buy Yen: Rising inflation (especially on the supply side, demand side inflation has started to pick up with the recent wage increases from this year’s Shunto) => force rate hikes.
Problems: long term historical deflation => BOJ is likely to allow inflation to run hot before increasing rates. Yen Carry trade (borrow yen to buy USD) adding more downside pressure to the Yen. Strong dollar (also an inflation problem) will cut potential upside for JPY/USD pair.
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Hope that helps.
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