Danske Research likes long USD/JPY exposure via 3M call option.
"US fiscal easing may take centre stage as we move towards full employment in a matter of a few quarters and amid this, strongly rising US real rates take precedence. In this scenario, we should see USD strength against EUR, JPY and NOK. One would also expect USD/CNH to bottom out and with it, for other high-beta EM FX to fare poorly. We lean towards the latter," Danske notes.
"Real rates may stabilise in the short term, and so we use options to be agnostic about timing but add a long USD/JPY in the Danske FX trading portfolio. This assumes spot starts to trade more in line with rising US real yields, including a bottoming of USD/CNH, whereas decent commodity prices should be JPY-negative," Danske adds.