(Bloomberg) — Jupiter Asset Management’s Mark Nash has ramped up wagers for the yen to strengthen on the view that the Bank of Japan is likely to raise interest rates well into 2025.
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“We can see now there’s too little priced into Japan and US real rates are too high,” said Nash, whose absolute return bond strategy beat nearly 90% of peers in the last five years. “That’s almost one of the perfect trades where you have both sides in your favor.”
Bets on a stronger yen are now the biggest currency position in Nash’s fund, totaling around 15% of its risk exposure. The London-based money manager on Monday added to wagers on the yen to strengthen and is buying the currency against the Swiss franc, Australian and New Zealand dollars.
Nash’s views echo those of Vanguard and RBC BlueBay Asset Management that Japan’s borrowing costs are likely to march higher — expectations that stand out amid a sharp pullback in market pricing for more tightening this year. Getting the yen call right has rarely been so critical: traders had staked billions of dollars on the currency weakening, only to see it catapult in early August and crush the positions.
The fund manager sees scope for the yen to advance to around 130 against the dollar as the BOJ hikes rates “to 1% at some point, maybe sort of once a quarter over the next year.” Japan’s currency traded at 145.18 as of 7:25 a.m. on Wednesday morning in Tokyo.
Nash also boosted bearish bets on 10-year Japanese government debt to reflect his view that rates are set to rise. He’s bullish on the nation’s 30-year sovereign bonds.
He reckons a large chunk of risky carry trades that involved borrowing the yen to invest in higher-yielding assets have been washed out. Hedge funds, major players in the trade, turned bullish on Japan’s currency for the first time since 2021 in the week through Aug. 13, Commodity Futures Trading Commission data showed.
“We do think things have now changed and don’t get sucked into the carry trade again,” Nash said. “Japan’s policy is in the wrong place, and so it makes sense that the yen should come back.”
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