Reuters – A potential rise in yen borrowing costs after Japan’s tiny step toward monetary tightening could slow short-term money inflows into commodities, but longer-term investors such as pensionfunds will probably keep on buying.
The Bank of Japan’s decision on Thursday to scrap its ultra-easy monetary policy isn’t likely to lead to a quick jump in interest rates, but the move has created enough uncertainty that it could limit hedge funds’ buying of such risk assets.
Global commodities markets plunged earlier in the week as hedge funds with an eye on a possible BOJ shift unwound yen carry trades, in which they borrow in a low-yielding currency like the yen to invest in assets in higher yielding currencies or in commodities.
Prices rebounded a little by the time of the BOJ news, but they remain low and the new interest rate picture could mean that only longer-term investors will continue to buy such assets.
“I still believe that the long-term inflow of funds into commodities will continue,” said Akio Shibata, deputy director at Marubeni Research Institute.
