Yen May Be Currency Winner as Disinflation Concern Grips Markets


© Reuters. Yen May Be Currency Winner as Disinflation Concern Grips Markets

(Bloomberg) — The yen is likely to benefit most among currencies as disinflationary pressures bear down on markets and investors shun risk, according to Societe Generale (PA:).

The U.S. five-year, five-year inflation swap rate this week dropped as low as 2.068%, the least since January, while the equivalent euro-area rate is hovering close to its lowest level since March. Expectations for consumer-price gains have tumbled, and that has helped spur an increase in bets on policy easing by the U.S. central bank.

For SocGen strategist Kit Juckes, there’s a danger that it will be as difficult to revive inflation now as it was to rein it in back in the 1980s. And that has him upbeat about the prospects for the Japanese currency.

“In this fight against disinflation, the currency winner is likely to be the yen,” Juckes wrote. “Risk aversion always helps the yen.”

He recommends selling the euro against the yen, and expects that overall bets on Japanese currency strength will perform well. With the U.S.-China trade war intensifying and investors flocking to haven assets, the yen has gained around 1.8% this month against its U.S. peer and is May’s best performer among Group-of-10 currencies.

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.

Comments

comments