Haven yen to win in a Washington shutdown

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As Washington flirts with shutdown, the “haven” yen is a likely beneficiary.

To the chagrin of many yen bears, the Japanese unit refuses to soften decisively beyond the Y100 to the dollar level, hitting Y98.46 mid-session on Wednesday.

But analysts are piling on again, reiterating their calls for more yen weakness.

Derek Halpenny, European head of global markets research at Bank of Tokyo- Mitsubishi, points to Friday’s inflation report and next Tuesday’s Tankan survey providing evidence that Abenomics is working: positive news that in the recent past has tended to encourage yen selling.

Mansoor Mohi-uddin, head of forex strategy at UBS, argues the yen will underperform as it again becomes the favoured carry trade vehicle.

“The yen is likely to be the funding currency of choice rather than the dollar for the rest of the year given the risk the Fed still starts tapering its own asset purchases in December or January,” he says.

“With the ECB balance sheet shrinking as banks repay their Longer-Term Refinancing Operation loans and the Bank of England refraining from additional easing for now, the BoJ stands out for the scale of its quantitative easing amongst the major central banks.”

Bank of America has an initial target of Y101.54.

jamie.chisholm@ft.com

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