Investing.com – UBS said the Japanese government’s push to encourage domestic capital allocation by the Government Pension Investment Fund and retail NISA investors raises the prospect of asset repatriation flows that could support the yen.
The potential size of these flows is large enough to matter for foreign exchange markets, the firm said. Asset allocation changes would require lengthy processes, UBS noted.
The core driver of yen weakness—Japan’s fiscal and monetary policy mix—remains intact, according to the firm. UBS said it remains skeptical that the flows will translate into meaningful near-term yen appreciation.
The direction of travel still favors a weaker yen, UBS said. Headline risk around possible further policy announcements suggests the risk-reward of aggressively adding to yen shorts has become less attractive, the firm added.
UBS did not specify a timeline for when repatriation flows might begin to affect currency markets.
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SOURCE LINK : UBS says Japan repatriation flows unlikely to lift yen near-term By Investing.com
