Buy Japanese Yen To Hedge Against Election Uncertainty: Goldman Sachs

Investors dealing with uncertainty over the presidential elections should consider parking funds in Japanese Yen, Goldman Sachs Group Inc (NYSE: GS) co-head of global foreign exchange and emerging markets strategy, Zach Pandl, said in an interview to CNBC Street Signs Asia.

In October, a publication in the Financial Times mentioned that U.S. investors are adjusting to the possibility of a Joe Biden presidency post-election along with a Democrat-led majority in the House of Congress.

What Happened: Zach Pandl said that the undervalued Yen is a safe-haven currency with a wriggle room. Irrespective of a delay in poll counts or any unexpected election outcomes, the Yen could act as a good hedge against the dollar uncertainties.

He added that “in a disorderly period for the global economy, whether an election uncertainty or on future lockdowns, the yen probably deserves a place in investor portfolios.”

Why It Matters: Pandl’s expects that pro-risk currencies like the Australian dollar and Canadian dollar could witness a lift, provided Biden sweeps the elections and introduces a more massive fiscal stimulus next year.

He also believes that the U.S. Dollar index could face headwinds in the near term due to the resurging second phase of lockdowns in Europe.

Pandl said in the interview that he estimates the fair value of the Japanese Yen to be around 95 per U.S. dollar. Currently, the USD/JPY pair is trading at 104.77 on last check Tuesday.

However, Pandl does not expect any near term correction in the rates.

Related Link: Sell Dollar On Odds Of Biden Win, Coronavirus Vaccine: Goldman Sachs