Nomura favours short positions on CHF/JPY due to the yen’s positive carry. This is attributed to the Swiss National Bank’s policy rate being lower than that of the Bank of Japan.
The firm also prefers short GBP/JPY. It notes that the UK is unlikely to implement an extensive fiscal stimulus akin to Germany’s, as there is no substantial stimulus expected in the upcoming Spring Statement.
Shorting The Franc Against The Yen
Nomura sees value in selling the franc against the yen, mainly due to the interest rate gap between the Swiss National Bank and the Bank of Japan. With Japan offering a better yield, the carry on short CHF/JPY positions remains attractive. Policy direction is reinforcing this view, given that the SNB lowered rates in a move that diverges from many global central banks. As long as Japan refrains from tightening aggressively, this gap should persist.
A similar rationale applies to short positions in sterling against the yen. The expectation is that the UK government will not introduce a large-scale fiscal boost, unlike Germany. With no major spending push expected in the upcoming Spring Statement, growth in the UK may remain weak. That backdrop does little to support the pound, particularly against a currency like the yen, which continues to benefit from capital flows attracted to its yield profile.
Monitoring Policy Signals
For traders following these themes, the coming weeks require attention to central bank signals and any shifts in expected policy moves. The yen’s appeal remains tied to the Bank of Japan’s stance, while both the franc and sterling face challenges from domestic policy and broader economic conditions. Keeping an eye on potential surprises in fiscal policy or rate expectations could be key in assessing whether these positions remain attractive or need adjustment.
