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LivestreamMenuWhile effects of the intervention on the Japanese yen appear to be fading, relative value carry strategies should continue to thrive, according to Goldman Sachs. Even at the cost of weakness in the greenback, “small but unusual” U.S. interventions in the yen and Treasury markets “have shown a clear revealed preference for supporting other assets,” strategists led by Kamakshya Trivedi said in a note Friday. “This greater willingness to resort to unconventional choices raises questions about whether other even more extreme choices that come at the expense of the dollar could be considered, especially if other harder choices on fiscal and monetary tightening are avoided,” Goldman added. Goldman noted that carry is on track for its best year in data back to 2010, tracking performance through August, adding that there has been resilience amid recent bouts of yen intervention and the U.S. Treasury’s recent buyback announcement. JPY= YTD mountain JPY “We see global economic conditions as supportive for further carry performance ahead,” Goldman said. Meanwhile, Europe will also likely be in focus if there are renewed geopolitical tensions and energy prices, as traders enter crunch time for gas storage, Goldman noted. “While EUR/USD has unwound some of last week’s sharp spot increase, a positive skew in options pricing remains and may be tested if gas flows remain constrained,” it added.
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