Credit Suisse likes long JPY exposure to express the coming US elections risks.
"In FX markets, the clearest manifestation of pricing for US election risk can be seen in USDJPY implied volatility. The 2-mth tenor which covers 3 Nov is showing a relatively high premium to the 1-mth tenor, especially in comparison to other crosses," CS notes.
"We suspect pre-existing wide use of short USDJPY risk hedges may be one reason why USDJPY spot has performed well recently. Nevertheless, longer term we see an inevitable grind towards our USDJPY 103 target unless US real yields move materially higher," CS adds.