TOKYO, NOVEMBER 08, 2016 (Bloomberg): The yen is looking like a long-term winner after the Nov. 8 U.S. presidential vote, following a protectionism-heavy election campaign that’s roiled markets worldwide and spurred the currency toward its best year since the 2008 global financial crisis.
Options traders have become more bullish on the yen as the election nears, while hedge funds wagered since early January that the currency will gain. JPMorgan Chase & Co. and HSBC Holdings Plc say that neither Democrat Hillary Clinton or Republican Donald Trump will favor a stronger dollar, so any short-term fluctuations in the yen as the vote nears are likely to give way to gains for the Japanese currency over the longer term. An expected Federal Reserve rate increase also may already be priced in.
“Regardless of which candidate becomes president, U.S. policies are expected to be more protectionist and keep a cap on the dollar,” said Tohru Sasaki, head of Japan markets research at JPMorgan in Tokyo. There is another reason for the dollar rally to wane, he said. “If the Fed does raise interest rates in December, it will likely follow the same pattern as last year where the dollar and U.S. yields rose until a rate increase and then declined.”
Despite futures signaling 80 percent odds for a Fed interest-rate increase in December, the dollar faltered against the yen last week with its steepest slide since July. The yen fell in November 2015 before rebounding in December, when the U.S. central bank hiked borrowing costs for the first time in a decade. Its 15 percent surge this year is the strongest performance among Group of 10 currencies.