Beyond 2020: Post-Election Policies
Goldman Sachs calls yen insurance against U.S. election uncertainty
Goldman Sachs analyst said on Tuesday that investors seeking protection from uncertainty in US election results could place their savings in Japanese yen.
Markets are warming up faster this week ahead of expected "blue wave" in the US elections. This is the result in which Joe Biden wins Donald Trump in the presidential race, and Democrats get a majority in both houses of Congress.
But some investors are concerned that election results may not be as expected and that the presidential race could be contested if there is no clear winner., and this is an event that will definitely cause a lot of volatility in the markets.
Client Call: Macro Outlook 2021
«We think the Japanese yen is likely to continue to be the preferred hedge against more uncertain election results or delayed vote counts.», – stated Zach Pandle, Co-Head of Global Monetary Policy, Exchange Rate Strategy and Emerging Markets, Goldman Sachs.
On CNBC, the analyst said the yen, a safe haven currency, is undervalued and has the potential to rise as global interest rates remain low and investors move away from the US dollar. According to him, «fair value» yen is about 95 yen per US dollar.
But the yen, which traded at 104.72 per US dollar on Tuesday afternoon «still pretty far» from that level and may not reach it soon, said Pandle.
«This will require catalysts or require some withdrawal from the world markets from Japanese investors, he said. – But in times of turmoil in the global economy, be it election uncertainty or possible quarantine measures, the yen probably deserves a place in investor portfolios».
According to Pandle, if «blue Wave» materializing, the possibility of more significant fiscal stimulus in the US next year could warm up the most risky currencies. He added that his preferred strategy, given the outcome of the election, would be to withdraw into Canadian and Australian dollars..