Friday, October 30, 2015

JPY: Japanese love for USD to prevail in future – Nomura

FXStreet (Delhi) - Research Team at Nomura, note that the updated lifers’ investment plans and the higher possibility of near-term Fed lift-off suggest the trend of buying USD and USD denominated securities for investments is likely to continue and USD will benefit the most from Japanese investment in foreign securities.

Key Quotes

“Japanese investment in foreign securities has been strong. Foreign bond investment has recovered recently, recording the third consecutive week of net buying last week. The start of the second half of the fiscal year is likely encouraging lifers to purchase foreign bonds.”
“Major lifers’ investment plans for H2 FY2015 showed strong dip-buying demand for foreign bonds. Their FX forecasts show a strong bias for USD bond investment, rather than EUR bonds, while some lifers specifically said they are considering concentrating their foreign bond investment in USD-denominated bonds.”

“Retail investors also have a strong preference for USD among major currencies, according our individual investor survey. In the toshin market, the share of USD and US assets in the outstanding of foreign currency denominated toshins has been rising. Public pension funds’ foreign investment likely follows key benchmarks and their investment is less biased towards USD than that of lifers and retail investors.”

“Since Japanese foreign portfolio investment accelerated last fiscal year, USD-denominated securities have been attracting the most Japanese flows, according to the BOP. In FY2014, 45.8% of foreign security investment (excluding JPY-denominated) was in USD-denominated securities. The USD share is even higher so far this fiscal year and more than 100% (101.6%) of foreign security investment between April and August this year was in USD-denominated securities.”

“Japanese investors have been selling EUR-denominated securities recently, even though they have been strong net buyers of foreign securities. So far in FY2015, GBP (12.2%) and AUD (7.9%) are also attracting some Japanese flows, but Japanese investors’ preference for USD assets is strong.”
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