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23-09-2022, 01:53 PM
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https://www.ft.com/content/e8a550a4-7011...2c48d07513
in New York 2 HOURS AGO
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The Bank of Japan’s intervention to prop up the yen this week comes as hedge funds and asset managers have built up large short positions against the currency. With billions of dollars on the line, many say they are staying put for now.
The yen has fallen victim to the remarkably strong dollar this year, reaching its weakest level against the US currency in 24 years on Thursday just before the BoJ’s move. It has been losing value since the start of the year, a move that accelerated after the Federal Reserve signalled its intention to implement rate rises at one of the fastest clips in years.
That weakness has attracted bets from investors wagering the yen still has further to go. And despite the BoJ’s attempt to strengthen the currency, investors and analysts said they do not expect a massive unwinding of the short positions any time soon.
While the intervention might bolster the yen in the very short term, they argued the only way it will appreciate meaningfully for a sustained period of time is if Japan’s central bank raises rates or if the Fed starts loosening monetary policy. Neither outcome is widely expected.
The $1.2tn of foreign currency reserves that the BoJ holds is likely to provide a buffer. But investors stressed those reserves are limited and provide only a temporary solution.
“The BoJ may succeed in dislodging some quantity of short interest in the short term, but longer term it is not a sustainable policy,” said David Rossmiller, head of portfolio management at Bessemer Trust. “It is not going to squeeze the shorts out.”
Speculators have a net short position worth roughly $7bn against the yen, according to data from the Commodity Futures Trading Commission — the largest since early June.
“It doesn’t change anything because the core reason why the yen has been weak is the Bank of Japan’s monetary stance, and that hasn’t changed, despite interest rates going up materially in the rest of the world,” said a hedge fund trader who has shorted the currency.
https://www.ft.com/content/e8a550a4-7011...2c48d07513
in New York 2 HOURS AGO
1
Print this page
The Bank of Japan’s intervention to prop up the yen this week comes as hedge funds and asset managers have built up large short positions against the currency. With billions of dollars on the line, many say they are staying put for now.
The yen has fallen victim to the remarkably strong dollar this year, reaching its weakest level against the US currency in 24 years on Thursday just before the BoJ’s move. It has been losing value since the start of the year, a move that accelerated after the Federal Reserve signalled its intention to implement rate rises at one of the fastest clips in years.
That weakness has attracted bets from investors wagering the yen still has further to go. And despite the BoJ’s attempt to strengthen the currency, investors and analysts said they do not expect a massive unwinding of the short positions any time soon.
While the intervention might bolster the yen in the very short term, they argued the only way it will appreciate meaningfully for a sustained period of time is if Japan’s central bank raises rates or if the Fed starts loosening monetary policy. Neither outcome is widely expected.
The $1.2tn of foreign currency reserves that the BoJ holds is likely to provide a buffer. But investors stressed those reserves are limited and provide only a temporary solution.
“The BoJ may succeed in dislodging some quantity of short interest in the short term, but longer term it is not a sustainable policy,” said David Rossmiller, head of portfolio management at Bessemer Trust. “It is not going to squeeze the shorts out.”
Speculators have a net short position worth roughly $7bn against the yen, according to data from the Commodity Futures Trading Commission — the largest since early June.
“It doesn’t change anything because the core reason why the yen has been weak is the Bank of Japan’s monetary stance, and that hasn’t changed, despite interest rates going up materially in the rest of the world,” said a hedge fund trader who has shorted the currency.
