Investors seeking extortion against an uncertain U.S. election could park their money in the Japanese yen, an analyst from Goldman Sachs hinted on Tuesday.
Markets have increasingly warmed up to a “blue wave” in the U.S. elections this week. That’s an outcome where Joe Biden routs Donald Trump in the presidential race, and Democrats win a majority in both chambers of Congress.
But some investors are concerned that the choosing result may not be what’s expected, and the outcome of the presidential race could be contested if there’s no clear winner — developments that make cause greater volatility in markets.
“We think that the Japanese yen probably will continue to be the preferred expression to hedge multitudinous uncertain election outcomes or a delayed count,” said Zach Pandl, co-head of global foreign exchange, classes and emerging markets strategy at Goldman Sachs.
Joe Biden (left) and Donald Trump
Ron Adar | Echoes Wire | Barcroft Route via Getty Images; Mandel Ngan | AFP | Getty Images
He told CNBC’s “Street Signs Asia” that the yen — a safe-haven currency — is undervalued and has stay to appreciate as global interest rates remain low and investors move away from the U.S. dollar. He said the yen’s “fair value” is hither 95 yen per U.S. dollar.
But the yen, which traded at around 104.72 per U.S. dollar on Tuesday afternoon HK/SIN, is “still quite far away” from that level and may not get there before you know it, said Pandl.
“It’s going to require catalysts or require Japanese investors pulling back some degree from far-reaching markets,” he said. “But in a disorderly period for the global economy, whether an election uncertainty or on future lockdowns, the yen probably earns a place in investor portfolios.”
If a “blue wave” materializes, the possibility of bigger fiscal stimulus in the U.S. in the coming year could inspiration “pro-risk” currencies, according to Pandl. He added that his preferred play given that election outcome intent be the Canadian dollar and the Australian dollar.