Friday, May 27

Bearish Yen Bets Mount as Currency Slumps for 12th Straight Day

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(Bloomberg) — Investors have the yen in a vise grip and are refusing to let go.

Asset managers boosted bearish bets against the currency to a record last week, while leveraged fund net-short positions were just off the highest in more than three years, according to the latest data from the Commodity Futures Trading Commission.

The yen weakened for a 12th straight day against the dollar Monday on bets further divergence between US and Japanese interest rates is inevitable.

The Japanese currency has fallen to a 20-year low this month as a dovish Bank of Japan keeps local yields anchored to the floor while their US equivalents surge on expectations for aggressive Federal Reserve rate hikes. The yen has also suffered from Japan’s position as an energy importer and is the worst-performing Group-of-10 currency against the dollar this year with a decline of about 9%.

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“The uptrend in dollar-yen remains intact, just that the pace may become a bit slower as markets have priced in almost everything related to US rate hikes,” said Koji Fukaya, president at Office Fukaya Consulting in Tokyo. Factors driving down the yen remain in place, with Japan’s trade deficit to persist and the yield gap between Japan and the US on a widening trend, he added.

Yen’s Twenty-Year Low Just the Start for Tokyo’s Traders

Consensus is building among Tokyo market watchers that the yen can extend losses to the 130 per dollar level in coming months before it steadies. Investors are betting the interest-rate divergence will outweigh efforts from government officials to reduce the currency’s slide.

Focus is turning to the BOJ meeting in the last week of April and whether there will be a change in nuance in comments from Governor Haruhiko Kuroda. He has said a weak yen is positive for Japan’s economy, even as business leaders raise concerns about the negative impact of the currency’s decline.

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