* Dollar/yen may rise to around 105 in coming months
* Rhicon exited yen bearish bets by mid-January
* Market ahead of itself in anticipating Japan outflows
By Masayuki Kitano
SINGAPORE, April 22 The yen looks set to fall
further and could hit 105 versus the dollar, although it is
unlikely to drop as smoothly as it has done so far, a portfolio
manager for FX trading fund Rhicon Currency Management said.
"A move to say, sort of 105 or thereabouts, is very much on
the cards," said Christopher Brandon, managing director for
Rhicon Currency Management, a Singapore-based fund with about
$350 million in assets under management.
"However, I think it would probably entail a broader dollar
appreciation across the board to see dollar/yen go higher than
that," Brandon told Reuters in an interview for the Reuters FX
Summit, when asked about the dollar's outlook versus the yen
The dollar scaled a four-year high of 99.95 yen this
month, after the Bank of Japan unveiled drastic monetary
stimulus and pledged to pump $1.4 trillion into the economy in
less than two years.
That marked a dollar rise of roughly 25 percent versus the
yen compared with mid-November, when yen bears began ramping up
bets for the yen to weaken, mainly on expectations for
aggressive monetary easing by the BOJ.
A trend toward a weaker yen now seems firmly entrenched, and
the chances of the dollar dropping back to levels below 83 yen
seen late last year appears "extremely unlikely", Brandon said.
Still the yen's declines from here on are unlikely to occur
in as straight forward a manner as has been the case until now,
said Brandon, a co-founder of Rhicon.
"The market is getting slightly ahead of itself in terms of
anticipating the flows out of Japan," Brandon said.
Analysts say the BOJ's sweeping stimulus is likely to
eventually prompt Japanese investors such as life insurers to
step up investment in higher-yielding assets overseas.
Japanese capital flows data, however, contains no sign so
far that the BOJ's drastic stimulus has triggered any Japanese
investor rush into overseas assets. Instead, they have
repatriated money back home in the first two weeks of April.
PRESSURE ON THE YEN
"If you look at how the investment decisions are made with
lifers and so on, it moves a lot slower," Brandon said, adding
that Rhicon has tried going long the yen in the past few weeks.
"I think that while we will see continued pressure on the
yen, I don't think it's going to be as straight line as it has
been," said Brandon, a short-term trader who holds positions for
up to a week.
Rhicon, which also has an intraday trader and another trader
whose trades last for as long as a month, may see opportunities
in different directions depending on the time frame, he added.
Brandon said Rhicon put on bearish bets versus the yen
starting around October to November of last year but exited all
of them by mid-January, after achieving its profit targets for
the trades and also based on technical signals.
"From October-November onwards, we were quite early into the
yen weakening trade," he said.
While a focus on technical analysis allows Rhicon to spot
trading opportunities early on, it can also lead to frustration
when the market moves on policy decisions, Brandon said. One
such example was the yen's tumble after the BOJ unleashed its
aggressive monetary easing on April 4, he added.
"Because it's not breaking or triggered by any technical
points, we tend to miss some of those," Brandon said.
"And it's frustrating. You're on the sidelines waiting for
patterns to develop or signals to come and the market runs away
before you've been able to get involved," he said.
Brandon said Rhicon achieved a return of roughly 7 percent
in 2012, owing to successful trades in the second half. Those
included bullish bets on the euro against currencies such as the
Australian dollar and the New Zealand dollar
, in addition to its bets that the yen would weaken.
More recently, Brandon said he has tried putting on bearish
bets against commodity currencies.
"I've actually been trying to express Aussie and kiwi
shorts, but actually against the euro, and against sterling. But
with mixed success," he said.
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