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Sell Yen & buy Japanese equities - Analyst

posted 9 Jan 2013, 05:24 by Mpelembe   [ updated 9 Jan 2013, 05:24 ]

Speculation that the Bank of Japan will start easing indicates it's a good time to sell the Yen. The next phase of weaking is likely to come in April when Abe can appoint a new Governor, says City indexAnalyst, Ashraf Ladi.



"(QUESTION: Central banks very much a focus. Let's speak with City Index Chief Global StrategistAshraf Laidi. He joins me now. Good morning to you, Ashraf. I want to start with the BOJ, speculation it'll ease. What do you do on the back of that? Do you sell the Yen? Do you buy Japanese equities?) 

Yes and yes. Over the last few days, there were some talks that RBA was not going to pressure the Bank of Japan on putting black over white on changing the definition of inflation to 2% and there was a slight change. We don't think that really, really matters. What really matters is that how much really pressure. So rather than focusing on the goal, he can focus on the means and that's basically as long as he tells them go for 12 to 13 a trillion Yen, then that'll be fine. Here is what we think is going to happen. Probably the next few days, yes, we may see another retest of 88 for USD/JPY, another retest of 117 in EUR/JPY and yields will probably go to 0.9 JGB yields. We may see a retreat, a pullback in the Yen crosses, i.e. a slight rise. However, we think that the important thing or the next phase of Yen weakness is going to happen in April when the current BOJ governor's term expires and Abe can appoint the person that he wants in the run-off towards that which is in April, then we're going to have a nice, a new phase of Yen weakness. 

(QUESTION: All right. Let's talk about the ECB. No move expected tomorrow but there's general easing trends, seems to be there. Is that a positive or a negative for the Euro, do you think?) 

We do not think that there is going to be a rate cut. And so we might see an upward kneejerk reaction from the news that there is no rate cut on Thursday when there is no news and we see an upward kneejerk reaction. What matters nowadays is the press conference and what kind of record we'll see or how Draghi will elucidate the extent to which there was an agreement or disagreement regarding a rate cut. But we really think that the currency is really going to be firmly supported at around 1.29. (QUESTION: All right, and I want to finish up with gold. Reuters did a poll yesterday. Ross Norman the most accurate over the past 12 years. Is this year going to be the first down year for gold, do you think, or was the selloff overdone right now?) Yeah, we thought last year was going to be the first in 12 years. We do not think that this year gold is going end lower. But medium term, short term there really is a very, very important support at around 1,640 moving averages trend line, a big confluence. So we think there's going to be another retest of 1,680 and even a 1,720."