Australia Retirement Trust (ART), Australia’s second-largest pension fund, has been building a contrarian position in the Japanese yen over the past six months while cutting part of its U.S. dollar exposure. The fund, which manages about A$370 billion, has lifted its yen overweight to the highest level seen in years and added to the trade when the currency moved close to 160 against the dollar. ART senior portfolio manager Jimmy Louca said the market may be overstating the drag from energy prices on the yen while underpricing the chance of another Bank of Japan rate increase. Rate swaps currently imply roughly an 80% chance of a September hike, with an October move largely fully priced. A Reuters survey also found that 57% of economists expect the BOJ to raise rates to 1.25% in September. At the same time, ART is running an about 0.5 percentage-point underweight in U.S. Treasuries, citing still-elevated U.S. inflation, resilient economic conditions, and competition for capital between the government and the AI investment boom. Louca said 30-year Treasury yields could rise toward 5.5%.
Australia Retirement Trust (ART), Australia’s second-largest pension fund, has been building a contrarian bet on the Japanese yen while trimming part of its U.S. dollar exposure, according to BlockBeats on Aug. 26.
ART, which manages about A$370 billion, or roughly $265 billion, has steadily increased its yen holdings over the past six months. Its yen overweight has climbed to the highest level in years, and the fund added to the position as the currency approached 160 against the U.S. dollar.
Jimmy Louca, a senior portfolio manager at ART, said the market may be overestimating how much energy prices are weighing on the yen and underestimating the possibility of additional rate hikes from the Bank of Japan.
Rate swaps currently indicate about an 80% chance of a BOJ hike in September, while an October increase is now largely fully priced by the market. A Reuters survey showed that 57% of economists expect the BOJ to raise rates to 1.25% in September.
At the same time, ART is about 0.5 percentage point underweight U.S. Treasuries. The reasons cited were U.S. inflation remaining above target, continued resilience in the economy, and competition for capital between government borrowing needs and the AI investment boom. Louca said 30-year U.S. Treasury yields could move higher toward 5.5%.
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