RBC recommended USD/JPY longs
In its trade of the week released, RBC recommended buying USD/JPY.
I don't have the exact details of the trade but the pair is down 20 pips to 113.72 today.
Here's their rational:
They entered the trade "on an expectation that general risk appetite will be supported by diminishing trade risks and capital outflows may pick up as we roll into the new fiscal half hear. Longer-term, the investment plans of the Life Insurers for the second half of the fiscal year should start to appear in the coming days. We expect them to confirm the picture from April. The rising cost of hedging leaves Japanese investors with few opportunities for buying hedged overseas bonds and successive Fed hikes will force investors to cut hedge ratios on existing UST holdings. This is the core of our medium-term bearish view on JPY."
