Yen bulls that have reaped nothing but disappointment in 2023 are finally eyeing gains as the currency climbs to its strongest in a month.
Predictions that the yen was poised for a 10% rally as Japan relented — somewhat — on its ultradovish monetary policy have yet to pan out, but signs that the currency is at a turning point are mounting. So, rather than changing their positions, some international investors are diversifying their rationale, and increasingly pinning their hopes for yen strength on the start of a global recession.
It’s easy to see why. The odds major economies will crash are rising as central banks are forced to keep tightening amid stickier-than-expected inflation, according to JPMorgan Chase & Co. economists. With that in mind, the yen — which tends to benefit from safe-haven flows — looks chronically undervalued as the currency’s trade-weighted, inflation-adjusted exchange rate hovers around lows last seen in 1971.