Australia’s second-largest pension fund is betting against the trend on the Japanese yen, continuing to accumulate the currency at around the 160 level while reducing its holdings of US Treasuries.

Australia’s second-largest pension fund, Australian Retirement Trust (ART), is betting against the trend on the yen. Managing around A$370 billion (roughly $265 billion) in assets, ART has steadily increased its yen holdings over the past six months, lifting its yen over-allocation to a multi-year high. The fund added to its yen positions when USD/JPY neared 160, with some of the capital coming from reducing its U.S. dollar exposure. Jimmy Louca, senior portfolio manager at ART, stated that the market may have overestimated the pressure energy prices are exerting on the yen while underestimating the likelihood of a Bank of Japan (BOJ) interest rate hike. Currently, interest rate swaps show an approximately 80% probability of a BOJ rate hike in September, and an October rate increase is almost fully priced in by the market. A Reuters poll found 57% of economists expect the BOJ to raise rates to 1.25% in September. Meanwhile, ART is currently underweight U.S. Treasuries by about 0.5 percentage points, citing reasons including U.S. inflation remaining above target, economic resilience, and the AI investment boom competing with the government for capital. Louca projects the 30-year U.S. Treasury yield could rise further toward 5.5%.