"The latest Bank of Japan meeting suggests that the central bank is in a wait-and-see mode, in spite of weakening economic data," Mark Haefele, chief investment officer at UBS Wealth Management, said in a report circulated on Friday.
"The recent strength in the yen means that Japanese investors in foreign assets, including the government's pension fund, are now considering whether to hedge their foreign exchange exposure. Such risk management measures could prevent the yen from weakening in the near future," he added.
UBS also introduced an underweight position on the Australian dollar versus the U.S. dollar.
The Aussie dollar declined on Tuesday after the Reserve Bank of Australia cut its cash rate to a record-low of 1.75 percent, surprising analysts.
"We believe that the recent recovery in the Australian economy is unsustainable, while U.S. growth is likely to rebound after a soft patch over the last two quarters," Haefele said.