Investors have been betting on a lower yen for years. These strategists say it's time to stop.
"In the fickle world of FX forecasting, one of the few aspects of stability is that the consensusrelentlessly sticks to its view that USD-JPY will rise over time," say the strategists at HSBC.
That means, they say, that strategists tend to seek out the negative angle for the yen on any piece of news.
"We suspect the recent rally in USD-JPY in response to Japan’s pending final approvalof a consumption tax hike is the latest example of such wishful thinking," the strategists wrote in a note to clients. And they don't expect it to last. For one thing, the tax wouldn't take effect for two years, and for another, its economic impact is difficult at best to predict.
"We believe the market is being prejudiced once again on USD-JPY," the HSBC strategists say. "Fight bias, fight prejudice: buy the yen."
Need more convincing? Think about the fact that Japan just opted not to inject more stimulus at a time when other central banks have been easing. So even though Japanese interest rates are minuscule, the difference between their rates and others' is narrowing.
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