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Yen Seen as `Safe Haven' for Investors Wary of Market Turmoil

  • LGT Bank urges clients to go long yen, short British pound
  • Yen is best performing currency against USD so far this year

The Japanese yen is undervalued and offers an attractive hedge for investors seeking protection from volatile global markets, according to LGT Bank’s Stephen Corry.

Corry, chief investment strategist for LGT private banking in Asia Pacific, is recommending that his clients take a long position on the yen and short the British pound. He says the yen is as cheap as it has been since at least the 1980s. It’s the best performer against the U.S. dollar this year among 16 major currencies, even after weakening 0.8 percent this week.

“If equities are falling, I always think it’s important to have something in your portfolio that is going up,” Corry said at a media briefing in Hong Kong on Thursday.

The yen’s real effective exchange rate (REER) is within 6 percent of a record low that was reached in June 2015 amid unprecedented asset purchases by the Bank of Japan. The pound’s REER rose for a seventh year in 2015, gaining 20 percent. On Wednesday, sterling fell to the lowest since February 2014 against the yen.

Overnight-index swaps indicate that the Bank of England will keep interest rates at a record-low 0.5 percent for the next 12 months. Corry said slowing economic growth and efforts to balance the U.K. budget could create a “severe fiscal drag” lasting into 2020.

LGT is the world’s largest family-owned and managed global private banking and asset management group. It is run by the Princely family of Liechtenstein. Assets under management totaled 125.7 billion Swiss francs as of June 2015.

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