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Japanese yen short positions plummet: due to suspected two central bank interventions? Next week, be careful of being knocked back to your original shape by TA.

2024-05-13

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The U.S. dollar rose about 1.9% against the yen last week. The U.S. dollar fell 3.4% against the yen the previous week, marking the largest weekly percentage decline since early December 2022, after the Bank of Japan was suspected of intervening in the currency market twice.

Japanese Finance Minister Shunichi Suzuki said on Friday (May 10) that the government would take appropriate action on foreign exchange issues if necessary, echoing recent remarks by other officials.

Hedge funds have slashed bets on the yen since March 2020 after Japanese authorities threatened to intervene in the market to support the yen.

Data released by the U.S. Commodity Futures Trading Commission (CFTC) on Friday showed that in the week ended last Tuesday, these leveraged investors held more than 81,000 contracts related to betting that the yen would fall, nearly a decrease from the previous week. 27,000 copies. This is the largest drop since the pandemic began more than four years ago.

The yen appreciated sharply last week, with a movement of about 9.4 trillion yen ($60.3 billion) in central bank accounts suggesting Japan may have intervened twice to boost the yen, and short bets were reduced.

The yen has fallen more than 1.7% against the dollar over the past five days.

Brad Bechtel, global head of foreign exchange at Jefferies Financial Group, said: "The intervention drove away short-term traders, but the broader market insisted on yen shorts and got a nice rebound."

Looking ahead to the week ahead, analysts pointed out that in early Asian trading on Thursday (May 16), Japan will release its first estimate of gross domestic product (GDP) for the first quarter. It will be a question of whether the economy will maintain growth or fall back into contraction. An interesting thing. If the latter is the case, the yen could continue to fall and approach the 160-yen range that triggered the first round of intervention last week.

Still, even if Japanese authorities intervene again near that range, a reversal of the trend is unlikely, as another quarter of economic contraction could fuel speculation that the Bank of Japan's next rate hike will be further delayed. For the yen to stage a decent recovery, GDP data will likely need to show an acceleration in economic growth, encouraging market participants to step up bets on a summer rate hike.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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Japanese yen short positions plummet: due to suspected two central bank interventions? Next week, be careful of being knocked back to your original shape by TA.

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