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Rich Advised to Buy Yen

Rich Advised to Buy YenRich Advised to Buy Yen

Money managers for Asia’s wealthy families are favoring the yen as it benefits from the turmoil in global financial markets.

Credit Suisse Group AG is advising its private-banking clients to buy the yen against the euro or South Korean won because the Japanese currency remains undervalued versus the dollar. Stamford Management Pte, which oversees $250 million for Asia’s rich, told clients the yen is set to strengthen to 110 against the greenback as soon as the end of this month. Singapore-based Stephen Diggle, who runs Vulpes Investment Management, plans to add to assets in Japan, Bloomberg reported.

The yen has outperformed all 31 other major currencies this year as Japan’s current-account surplus makes it attractive for investors seeking a haven. Bank of Japan Governor Haruhiko Kuroda’s Jan. 29 decision to adopt negative interest rates has failed to rein in the currency’s advance.

“All existing drivers still point to more yen strength,” said Koon How Heng, senior foreign-exchange strategist at Credit Suisse’s private banking and wealth management unit in Singapore. “The BOJ will need to do more to convince the markets about the effectiveness of its negative interest-rate policy.”

  15-Month High

The yen has appreciated more than 7% against the dollar this year to 112.16 in London Friday. It touched 110.99 Thursday, the strongest level since Oct. 31, 2014, the day the BOJ unexpectedly increased monetary stimulus for the second time during Kuroda’s tenure.

That’s a drawback for the central bank governor. He needs a weaker yen to help meet his target of boosting Japan’s inflation rate to 2% and keep exports competitive.

Stamford Management has briefed some of the families whose wealth it helps to manage about the firm’s “bullish stance” on the yen, said its chief executive officer, Jason Wang.

  BOJ ‘Ineffective’

“The adoption of negative interest rates reeks of desperation to me,” Wang said. “It’s akin to an admission by the BOJ that conventional monetary policy is ineffective in hitting their 2% inflation target.”

Credit Suisse predicts that the yen will strengthen to 115 against the euro in 12 months, from 126.91 Friday. Japan’s currency will gain to 11.10 won in 12 months, from 10.79, according to Heng.

In 2013, the yen tumbled 18% to 105.31 per dollar after Kuroda started quantitative and qualitative easing. It fell an additional 12% in 2014 to 119.78 helped by his surprise expansion of the program. The currency depreciated just 0.4% last year.

The yen’s weakness attracted tourists to Japan.

Financialtribune.com