Goldman Sachs said the case for tactically going long the yen has strengthened after the currency's recent gains. According to Sina Finance, the bank cited expectations that the Bank of Japan will tighten monetary policy, possible changes in Japanese capital flows, and the risk of further intervention.
The strategists, including Kamakshya Trivedi, wrote that the asymmetry has improved over a longer horizon, making short dollar/yen an increasingly attractive hedge for risk-seeking portfolios. Goldman Sachs also said Bank of Japan Governor Kazuo Ueda had essentially confirmed market expectations for a September rate hike, while speculation that the Government Pension Investment Fund may shift allocations toward domestic assets has increased the outlook for reduced capital outflows.
The bank said the global backdrop still weighs on the yen and should continue to do so absent growth concerns, but supportive domestic policy shifts should now have a greater impact after previously being a major source of downward pressure. It added that Japanese policymakers appear committed to using existing tools to attract capital inflows while retaining ample room for further intervention.
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