Source: Wall Street See
Some traders expect the yen to continue to weaken to 170, reaching a new low since 1986.
With a huge interest rate differential between the US and Japan, the yen bears are making a comeback!
On Thursday, the USD/JPY continued to rise and broke through the 160 level for the first time since April 29.
Due to the uncertainty of the Fed's interest rate cut prospects, the market's bearish sentiment towards the Japanese yen remains strong. Some traders expect the yen to continue to weaken to 170, creating new lows since 1986.
According to data from the Commodity Futures Trading Commission (CFTC) on Monday, asset management companies increased their bearish bets on the yen to the largest scale since 2006 in the week ending on June 18. The data also shows that hedge funds have increased their bets on the yen weakening, with buying volumes approaching recent highs.
At the same time, the yen's sharp decline has sparked speculation that the authorities may intervene again.
Between April 26 and May 29, the Japanese authorities injected a record-breaking 9.8 trillion yen (approximately $ 61.2 billion) to support the yen, which had fallen to its lowest level in 34 years. The trend of the yen indicates that the Japanese authorities may have intervened on April 29 and May 1 respectively. It is said that the amount spent during this period exceeded the total amount spent in 2022 to defend the yen.
Japanese finance minister Taro Aso and other officials said they were closely monitoring the currency market and would take all possible measures when necessary.
However, this verbal warning of 'barking but no biting' seems to have no effect. In the currency options market, the insurance premium (option cost) used to hedge the appreciation of the yen against the US dollar has fallen for the fifth consecutive day compared to the premium used to hedge the depreciation of the yen. This indicates that traders expect the yen to have further room for depreciation.
Editor/tolk