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Forex Flash: Interim update of lifers’ hedge ratio - Nomura

FXstreet.com (Barcelona) - Nomura Strategist Yujiro Goto notes that three major life insurance companies released their financial results for FY12 today and currency hedge ratios were slightly lowered by all three lifers from last September.

he begins by commenting that one of largest lifers is estimated to have lowered its hedge ratio to 49.0% from 56.1% and this lifer increased its‟ exposure in foreign currency assets by JPY587bn (USD5.9bn) during the second half of FY12, while higher valuations also boosted their value. Further, he notes that two smaller lifers are also estimated to have lowered their hedge ratio slightly while the value of foreign currency assets increased. While it is premature to conclude from three lifers‟ results, lifers have increased FX risk taking slightly as an expectation for a bolder policy response by the BOJ increased. He writes, “In terms of lifers’ investment from here, 10yr JGB yield is now trading at higher level than major lifers’ assumption as of April, encouraging lifers to accumulate JGBs gradually. Lifers may stay on the sideline for now, amid higher volatility of JGB market though.

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