The yen fell 0.3% to 152.62 per dollar in the Asia session on Wednesday, after jumping at least 1% in each of the past three sessions amid speculation that the authorities are ready to intervene.
Japan’s retail investors unwound bullish bets in the yen during the height of a recent rally, potentially capping its gains as talk of official intervention buoyed the currency.
Individual traders reduced ¥85.7 billion ($561 million) of net short positions in the dollar-yen pair from Friday to Tuesday, data from the Tokyo Financial Exchange Inc. showed. The wagers, which amounted to bets that the yen would strengthen, shrank by the most for any three-day period since October 2022, according to Bloomberg’s analysis of the figures.
Japan’s army of retail investors are a formidable force in domestic markets as their currency trading volumes surpass that of spot transactions compiled by the Tokyo Foreign Exchange Market Committee. The latest positioning suggests that these investors may have cut their losses as the dollar-yen pair rounded off its biggest three-day drop in well over a year.
“While a narrow interpretation would be that the Japanese retail investors are indeed contrarian to the broader FX market moves, a broader view would be that they continue to see the low-yielding yen as a carry-funding currency,” said Valentin Marinov, head of G-10 FX research and strategy at Credit Agricole. “The yen may not rally on a sustained basis so long as the Bank of Japan is seen as significantly more dovish than other central banks.”
The size of the net shorts in TFX is relatively small but it provides an indication of the direction of ¥451 trillion in monthly retail flows.
The yen fell 0.3% to 152.62 per dollar in the Asia session on Wednesday. Japan’s currency jumped at least 1% in each of the past three sessions amid speculation that the authorities are ready to join forces with the US to halt its recent weakness.
“Levels around 158 or 159 yen are where the risk of intervention becomes very high,” said Takuya Kanda, head of research at Gaitame.com Research Institute in Tokyo. “So I expect to see more trading strategies where investors buy dollars around the 153-154 levels and then quickly sell once the pair moves above 155.”
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