Yen Drops, Aussie and NZ Dollars Rise on GPIF Asset Allocation Change

The Japanese Yen declined while the Australian and New Zealand Dollars rallied amid reports revealing the new asset allocation mix of Japan’s GPIF pension fund.

Talking Points:

• Yen Drops, Aussie and NZ Dollars Rise on GPIF Asset Allocation Change

• S&P 500 and FTSE 100 Futures Suggest Risk-On Mood Likely to Continue

• See Economic Releases Directly on Your Charts with the DailyFX News App

A swell in risk appetite at the start of the trading week put pressure on the safety-linked Japanese Yen while pushing the sentiment-geared Australian and New Zealand Dollars higher. The MSCI Asia Pacific regional benchmark stock index rose 2 percent, with Japanese shares leading the way after a Nikkei News report cited unnamed sources revealing the new asset allocation for Government Pension Investment Fund (GPIF).

Asia’s largest pension fund will increase its holdings of Japanese stocks to 25 percent from 12 percent of the overall portfolio and cut the share allocated to JGBs to 40 percent from 60 percent. Foreign stocks and bonds were said to be allotted 30 percent of total holdings under the new setup, up from 23 percent. The fund will have leeway of up to 6 percent deviation from target distribution levels, meaning it could conceivably hold over 30 percent of its assets in Japanese equities.

Looking ahead, a quiet economic calendar in European and US trading hours is likely to see sentiment trends remain at the forefront as the driver of price action. S&P 500andFTSE 100futures are pointing firmly higher in late Asian trade, hinting the “risk-on” mood is likely is likely to continue. September’s German PPI figures are due to show factory-gate prices fell at a year-on-year rate of 1 percent, marking the worst reading in eight months. The outcome may not yield a strong reaction from the Euro however considering its limited implications for near-term ECB stimulus expansion.