Breaking News
0

Buy ‘Cheap’ Yen Before Its Big Awakening in 2019, SocGen Says

ForexNov 08, 2018 06:50PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Bloomberg. Japanese 10,000 yen banknotes are arranged for a photograph in Kawasaki, Kanagawa Prefecture, Japan, on Saturday, July 7, 2018. Japan’s currency rose against every single Group-of-10 peer in the first half, with an average 4.8 percent gain. Now a combination of U.S. protectionism, European populism and emerging market turmoil threatens to push the yen even higher in the second half, according to analysts. Photographer: Akio Kon/Bloomberg

(Bloomberg) -- It’s time to start loading up on “cheap” yen.

Using options to bet on gains for Japan’s currency is a smart wager for 2019, according to Societe Generale (PA:SOGN). The dollar rose to about 114 yen Thursday in New York, its strongest since early October, extending its advance after the Federal Reserve left rates unchanged and stayed on course to hike next month. The dollar set a 2018 high of about 114.50 yen on Oct. 4, which the bank cited as an area of technical resistance.

“On top of being a good entry point to buy yen, we think investors should consider rising risks of a sharp yen bounce in the medium term,” Olivier Korber, a currency derivatives strategist at SocGen, said in a research note Thursday.

The call for a yen rally dovetails with the firm’s assessment, laid out in a separate research piece Thursday, that the dollar is “overvalued.” Although SocGen said it’s wary of selling the greenback too soon because the U.S. economy is “still running hot,” the job market remains robust and the Fed is unlikely to signal a pause just yet, it sees a shift next year.

The result of the U.S. midterm elections, which produced a divided Congress, “supports the idea that the best quarter for economic growth in the current cycle will prove to be Q3 2018, and it’s all downhill from here,” Kit Juckes, a global fixed-income strategist at SocGen, wrote separately Thursday. “That suggests rates may peak next summer, at the same time as other, lagging central banks in Europe start raising rates.”

To wager on a stronger yen, Korber recommends buying an option structure known as an “appearing put spread,” expiring in a year. The structure includes the simultaneous purchase and sale of put options with different strike prices. One option has a feature that bets the yen won’t move below 100 per dollar over the lifetime of the structure.

Yen bulls will be looking for a pause in U.S. rate hikes by the Fed, expectations of Bank of Japan tightening or more risk aversion, he said.

“The potential for higher U.S. rates appears minimal compared with super low Japanese rates,” Korber wrote.

Buy ‘Cheap’ Yen Before Its Big Awakening in 2019, SocGen Says
 

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email