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SocGen sees additional gains for the yen

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According to Societe Generale, the Japanese yen will be the only currency among the rest, which will enjoy strong demand in the future. The reasons, according to the bank, are the avoidance of risky assets by investors and the deflationary processes that are beginning to creep into the world economy.

Five-year bonds against the five-year swap value of inflation fell to 2.068%, the lowest since January. The Eurozone equivalent hovers around its lowest level in March. Expectations are that consumer prices will continue to fall, which in turn increases the chances of further monetary lightening on the part of the Fed.

The SocGen strategist, Kit Juckes, has the potential for inflation to recover. That's what encourages him to believe that the Japanese yen will rise. "In this fight against deflation, the winner of the currencies will probably be the yen." - says Jucker, adding that "risk avoidance always reinforces the yen."

He recommends a EUR/JPY short position and expects purchases of the yen to increase further in the future. Deterioration in trade leads investors to seek safe heavens, with the yen up 1.8% in May, and is the best-performing currency of major currency pairs.

Source: Bloomberg Finance L.P.

Graphs: Used with permission of Bloomberg Finance L.P.


 Jr Trader Martin Nikolov

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