As long as investors reshuffle trading positions in light of the global economic slowdown perspective, JPMorgan Asset Management is seeking protection from uncertainty in Japanese yen.
"The yen is attractive with the fact that it's still cheap compared to historical levels, - Olivia Mayell said in Sydney, the managing director and head of the multistrategy department of the investment company managing a portfolio of 1,7 trillion dollars. - Our fundamental forecast is that the Japanese yen would strengthen a bit, despite the market's turbulence. That's one of the most important hedges which could be included in a portfolio nowadays".
Other hedging instruments, more volatility-oriented, such as the CBOE Volatility Index (VIX) and put-options for S&P500 benchmark, became more expensive, according to Mayell.
The yen, which works as a defensive asset during investors' risk rejection periods, gained strength versus the US dollar for 4% approximately, compared to October's low. At the same time, net long speculative positions for the currency reached the maximum level in two and a half years. According to currency analysts' median assessment, the Japanese yen will be trading at a level of 108 yen per 1 dollar till the end of the year.
Nevertheless, USD/JPY continued strengthening last week on the back of investors' risk appetite, especially in the United States. Dow Jones Industrial Average printed the highest rate in 14 weeks recently and that optimistic rally could not be ignored by currency speculators. USD/JPY had tested the crucial technical level of 111.00, bouncing off the local highs toward 110.40. The short-term technical analysis suggests the pair edging further North, at least until the recent equities' rally continues.