In battle of two havens, investors bet on yen over Swiss franc

Options markets favour the Japanese yen and analysts see the Swiss franc weakening. — Reuters pic
Options markets favour the Japanese yen and analysts see the Swiss franc weakening. — Reuters pic

TOKYO, Feb 8 — Investors are betting that the Japanese yen will do better this year than its haven counterpart, the Swiss franc.

With waning political risks in Europe and the Swiss National Bank reluctant to move away from its rhetoric on a “highly valued” currency, options markets favour the yen and analysts see the franc weakening. Add in speculation that the Bank of Japan will take tentative steps toward normalizing policy before the SNB, and that’s leading Investec Asset Management Limited to short the Swiss currency against the yen.

In the past week, as global stock markets have suffered a selloff, the franc has fallen 1 per cent against the yen. Six-month and one-year risk reversal options in franc-yen have slipped to the most bearish franc sentiment since October. Investec portfolio manager Russell Silberston sees prospects of funds flowing out of Switzerland as global growth picks up.

“Our preferred way to play this is short CHF versus the JPY,” he said. “That way we neutralise a lot of the defensive characteristics of the Swissie whilst also having a solid valuation supporting the JPY.”

ING Bank NV sees the pair 10 per cent lower by the end of the year at 104, from 116 now. The consensus among analysts is for the cross to slip to 115.79 by end-2018, according to calculations based on franc and yen forecasts in a Bloomberg survey.

The yen has been boosted as “things are starting to turn the corner in the Japanese economy,” said ING currency strategist Viraj Patel. “The Swiss franc doesn’t have those dynamics. The SNB will be the last ones to even consider moving. They’re at the back of the queue when we look at a group of countries looking to normalise monetary policy.” — Bloomberg

Related Articles