zerohedge.com / by Tyler Durden / Nov 29, 2016 9:54 AM
One week after JPM made the exact same forecast, warning that the recent surge in the USDJPY will fade dramatically as Dollar euphoria shifts to concerns about protectionism, overnight UBS Group’s $2 trillion wealth-management arm said yen traders have got the Donald Trump “trade” all wrong, and the yen will strengthen to 98 per dollar by this time next year.
Cited by Bloomberg, the firm’s Tokyo-based head of Japanese equity research Toru Ibayashi echoed warnings first voiced on this website two weeks ago, and says expectations for fiscal expansion have become overblown, and protectionist policies will come first in the new U.S. administration.
The conventional wisdom that has taken hold in the days since Trump’s victory is that since the President-elect campaigned on pledges of “massive” tax cuts and spending of as much as $1 trillion over a decade to rebuild infrastructure, he will send inflation surging while unleashing a new debt-funded fiscal stimulus. This speculation has driven the yen to an eight-month low near 114 on Friday, capping the biggest three-week decline since 1995.