Strategy Call on the Japanese Yen
Edmond de Rothschild Asset Management has publicly recommended that investors treat recent yen weakness as a buying opportunity, framing the move as part of a wider market shift. The asset manager's view centres on the idea that the Japanese currency has been held down well below its fair value for an extended stretch, and that the forces keeping it suppressed are now beginning to reverse.
Rather than chasing the yen's latest upswing, the firm urges a patient, dip-buying approach. In its assessment, the currency's recent rally is not a one-off spike but the opening chapter of a more sustained correction away from deeply undervalued territory. For portfolio managers watching the cross, the implication is that further yen strength remains on the table over the coming months.
Carry Trade Unwind as the Driving Force
A key pillar of Edmond de Rothschild's argument is the ongoing unwinding of carry-trade positions. For much of the recent cycle, investors borrowed in low-yielding Japanese yen to fund higher-yielding assets elsewhere, a strategy that kept persistent selling pressure on the currency. As global interest-rate differentials narrow and risk appetite shifts, those leveraged positions are being closed at pace, adding buying pressure to the yen.
The asset manager sees this reversal as structural rather than purely cyclical. When the funding leg of a carry trade starts to shrink, the yen naturally appreciates as the outflow of borrowed funds dries up. Edmond de Rothschild believes the current unwind is still in its early stages, which is why it frames the latest rally as a starting point rather than a destination.
What It Means for Currency Portfolios
For traders and fund managers building views on the G10 basket, the message from Edmond de Rothschild is clear: the yen's long-run undervaluation is coming to an end, and the carry-trade mechanism that sustained that discount is losing its grip. The firm's tactical recommendation is to accumulate yen exposure on any pullbacks, positioning for a broader revaluation that it expects will play out over the medium term.
The commentary, reported by Bloomberg Markets, underscores a growing consensus among institutional desks that the yen trade is turning. While not every analyst agrees on the speed or magnitude of the move, Edmond de Rothschild's call adds institutional weight to the argument that the currency's most undervalued days are behind it.