Buy loonie, short yen, says Nomura

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SONALI VERMA
Globe and Mail Blog
Posted on Wednesday, May 25, 2011 8:44AM EDT

Buy the loonie against the yen to capitalize on rising interest rates in Canada and Japan's widening trade deficit, Nomura Holdings says.

“We have been accumulating yen shorts in recent weeks, and we are adding long Canadian dollar-yen exposure, in order to broaden yen shorts further,” Jens Nordvig, global head of G-10 currency strategy in New York at Japan’s largest brokerage, wrote in an e-mail to Bloomberg News.

Nomura recommends buying the dollar at around 83.65 yen, with a target of between 87 and 88 and a stop-loss order at 82.

The loonie is trading at around 83.78 yen at the moment. It earlier fell as low as 98.16 U.S. cents, the weakest level against the greenback since March 28.

Canada’s currency has strengthened 3.1 percent against Japan’s this year. The Bank of Canada next meets to review rates on May 31. It last increased rates on Sept. 8.