NEW YORK (Reuters) - Worries about the global economy will boost the yen against the dollar in the coming months despite Japan’s aggressive stimulus program, John Taylor, chairman of FX Concepts, one of the largest currency hedge funds, said on Monday.
“We’re forecasting that the yen is going to be strong between now and July,” Taylor said at the Reuters FX Summit. “I think in the next quarter, we’ll trade between 92 and 102, and I’d be more inclined to think 92.”
The dollar rose to within striking distance of 100 yen on Monday, a level last breached in 2009. The Japanese currency began grinding lower earlier this year, and losses accelerated in early April when the Bank of Japan said it would try to end decades of stagnation by pumping $1.4 trillion into its economy.
So far, though, the move has not encouraged Japanese-based investors to sell yen for higher-yielding assets abroad. Recent government data showed Japanese investors have mostly brought money home this year to cash in on yen weakness.
He said the repatriation, typical at the start of the year, was more aggressive this year because investors are worried about taking on risk at a time when global growth is fragile.
“The Japanese, from what I’ve seen, just don’t buy this act yet,” he said, adding slower-than-expected growth in China, government belt-tightening in the United States and worries about Europe’s banking system have made investors wary of risk.
The International Monetary Fund cut its global growth forecast to 3.3 percent this month, on par with 3.2 percent growth seen in 2012.
FX Concepts over the last few weeks has been shedding a long dollar/short yen position that it has held since November and is now neutral, Taylor said.
He said yen weakness would likely resume in the second half, which could push the dollar as high as 110 yen by year end.
That will be driven partly by stronger U.S. growth, which Taylor said is likely to outpace growth in other advanced economies.
By 2014, the combination of stronger U.S. growth and aggressive BoJ policy could push the yen lower than even Japanese policymakers find comfortable.
“We think 120 yen next year doesn’t seem outrageous,” Taylor said, adding “the Japanese are not going to like that so much.”
Such a rapid depreciation could lead to the inflation BoJ policymakers say they want, Taylor said, but probably won’t stoke much growth.
“Theoretically the BoJ shouldn’t push harder than it’s pushed already because they don’t want it to go too fast,” he said. Because then you’ll get the inflation kick before you get any other kind of kick.”
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Reporting By Steven C. Johnson; Editing by Chris Reese