Global investors expect the Yen to outperform most major currencies next year, expecting the Japanese currency to recover after a year of strong fluctuations and recording the worst profit against the USD, according to a survey by Bank of America.
About a third of nearly 170 fund managers surveyed said the Yen will be the currency with the best profit next year, followed by gold and greenback. Only 3% of respondents chose the British bang as their currency of choice.
The lackluster yield of the Yen this year makes the survey results noteworthy. The currency has gained about 1% against the US dollar the weakest in the G10 group.
Meanwhile, gold prices have continuously set new records this year, supported by central bank buying demand and safe-haven cash flow of individual investors against geopolitical and trade risks. In contrast, the Bloomberg Dollar Index has fallen about 7% since the beginning of the year, on track for its worst year since 2017, partly due to uncertainties related to President Donald Trump's policies.
Expectations for the Yen
The Bank of Japan's (BoJ) unclear outlook on the rate hike roadmap for the year is one of the reasons why the Yen is less attractive. In addition, Ms. Sanae Takaichi - who supports loose monetary policy - was elected prime minister last month, along with plans to launch a larger-than-expected spending package, which also contributed to weakening the currency.
However, optimism for the currency in 2026 may stem mainly from the currency's underdevelopment, which reflects the weak and prolonged investment capital flow into Japanese assets. According to a survey by Bank of America, investors are also maintaining a lower holding ratio of Japanese stocks than the benchmark at a net level of 4%, a trend that has lasted for more than a year.
More risky traders may also be betting on the possibility of Japanese authorities intervening in the next few months to support the Yen, a scenario that happened last year when the currency broke through the threshold of 160 Yen/USD - a level closely monitored.
Speculators are still looking to buy USD/JPY and see how much the Japanese Treasury can withstand it, as the agencys oral warnings are having an increasingly poor impact on the market, Francesco Pesole, currency strategist at ING Bank NV in London, said on Tuesday. Any red line could be close to the 160, and we could see upward pressure again in the coming days, Francesco added.
In a monthly survey of global fund managers, Bank of America surveyed 172 investors managing a total of $475 billion in assets, from November 7 to 13.
