The closer the U.S. default, the more often the question arises: where to invest money? The Japanese yen is one of the most interesting options. Despite the weak economy, the new BoJ head Kazuo Ueda intends to stick to an ultra-loose monetary policy. Despite the widening yield differential between U.S. and Japanese bonds, which boosts the USD/JPY rally, the yen is a safe-haven asset. And it, as usual, will be in high demand during global shocks.
The U.S. Treasury Department confirmed that, in the absence of an agreement to raise the debt ceiling to $31.4 trillion, the government would not be able to fulfill its obligations. This would lead to the first default in the history of the United States. A similar situation occurred in 2011 when Democrats and Republicans could not reach a compromise, the U.S. credit rating was downgraded, and chaos ensued in the market. Eventually, an agreement was signed within a few hours. Hardly anyone would like a repeat of the history of 12 years ago.
Especially Japan, whose investors are the largest holders of American debt. However, a default could paradoxically lead to increased demand for U.S. Treasury bonds as a safe-haven asset. U.S. debt obligations rank second in the list of most popular capital investment tools after gold in case Republicans and Democrats failed to reach an agreement. This is the opinion of global investors, participants of the Markets Live Pulse survey.
Best assets to buy in case of U.S. default
This list also includes the yen. It lags in popularity behind both the U.S. dollar and Bitcoin. The cryptocurrency sector leader is perceived in the market as a kind of digital gold. Its purchase is also considered a successful investment in case of default. As for the dollar, history knows many examples when the market bought it like hotcakes amid shocks. Even if the epicenter of these shocks was the U.S.
According to Bank of America, the default will push America into recession. And during periods of the U.S. economic downturn, the commodity market suffers. A fall in commodity prices will favorably affect Japan’s foreign trade and drive the USD/JPY quotes down. If a recession is not considered inevitable, carry trade deals will continue to thrive. This will keep pressure on the yen.
The same can be said about economic growth. Bloomberg experts forecast it to be anemic in the Land of the Rising Sun in the first quarter. UBS has downgraded its assessment from 2% to 1% but expects acceleration for the rest of the year. Goldman Sachs also worsened expectations from 1.7% to 1.1%. Nevertheless, the bank predicts an explosive rise in GDP in the fourth quarter.
Technically, the USD/JPY upward move towards the upper boundary of the triangle continues. It makes sense to increase longs formed from 135.4. The mark of 137.2 appears as an intermediate target.
The material has been provided by InstaForex Company – www.instaforex.com
The closer the U.S. default, the more often the question arises: where to invest money? The Japanese yen is one of the most interesting options. Despite the weak economy, the new BoJ head Kazuo Ueda intends to stick to an ultra-loose monetary policy. Despite the widening yield differential between U.S. and Japanese bonds, which boosts the USD/JPY rally, the yen is a safe-haven asset. And it, as usual, will be in high demand during global shocks.
The U.S. Treasury Department confirmed that, in the absence of an agreement to raise the debt ceiling to $31.4 trillion, the government would not be able to fulfill its obligations. This would lead to the first default in the history of the United States. A similar situation occurred in 2011 when Democrats and Republicans could not reach a compromise, the U.S. credit rating was downgraded, and chaos ensued in the market. Eventually, an agreement was signed within a few hours. Hardly anyone would like a repeat of the history of 12 years ago.
Especially Japan, whose investors are the largest holders of American debt. However, a default could paradoxically lead to increased demand for U.S. Treasury bonds as a safe-haven asset. U.S. debt obligations rank second in the list of most popular capital investment tools after gold in case Republicans and Democrats failed to reach an agreement. This is the opinion of global investors, participants of the Markets Live Pulse survey.
Best assets to buy in case of U.S. default
This list also includes the yen. It lags in popularity behind both the U.S. dollar and Bitcoin. The cryptocurrency sector leader is perceived in the market as a kind of digital gold. Its purchase is also considered a successful investment in case of default. As for the dollar, history knows many examples when the market bought it like hotcakes amid shocks. Even if the epicenter of these shocks was the U.S.
According to Bank of America, the default will push America into recession. And during periods of the U.S. economic downturn, the commodity market suffers. A fall in commodity prices will favorably affect Japan’s foreign trade and drive the USD/JPY quotes down. If a recession is not considered inevitable, carry trade deals will continue to thrive. This will keep pressure on the yen.
The same can be said about economic growth. Bloomberg experts forecast it to be anemic in the Land of the Rising Sun in the first quarter. UBS has downgraded its assessment from 2% to 1% but expects acceleration for the rest of the year. Goldman Sachs also worsened expectations from 1.7% to 1.1%. Nevertheless, the bank predicts an explosive rise in GDP in the fourth quarter.
Technically, the USD/JPY upward move towards the upper boundary of the triangle continues. It makes sense to increase longs formed from 135.4. The mark of 137.2 appears as an intermediate target.
The material has been provided by InstaForex Company – www.instaforex.com