Australian Retirement Trust Bets on Japanese Yen Recovery

Australian Retirement Trust, the second-largest pension fund in Australia, has built its largest overweight position in the Japanese yen in years. Managing approximately A$370 billion, the fund increased its yen holdings as the currency weakened toward 160 per dollar, reducing its exposure to the US dollar to facilitate the move.

Senior portfolio manager Jimmy Louca stated the fund is betting that markets are underpricing potential interest rate hikes by the Bank of Japan. Louca views the fair value for the dollar-yen exchange rate at around 150, with the potential for it to reach the high 140s.

Simultaneously, the fund has taken an underweight position in US Treasuries. Louca cited concerns that resilient growth, above-target inflation, and the AI investment boom will push yields higher. He believes these fundamentals will outweigh efforts by the United States Department of the Treasury to suppress yields.