Analysts at Royal Bank of Scotland believe that after its 2010 growth Japanese yen may fall versus the greenback in 2011. Such forecast is based on the expectations that traders will once again start using yen to fund carry trades. In other words, investors will borrow in Japanese currency to invest in higher-yielding.

According to RBS, the possibility of rate hike in Japan is very low. The Bank of Japan keeps its benchmark interest rate at 0.1% since December 2008. It’s also necessary to take into account American economic rebound, claims the bank.

As a result, the specialists advise investors to bet on yen’s decline versus US, Canada’s and Singapore’s dollar.

During the past year yen added 3.2% versus 10 developed-nation currencies, while in January it lost 2%. The yield spread between 2-year US and Japanese government bond extended yesterday to the maximal level since June of 63 basis points.



Chart. Daily USD/JPY

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