According to Sina Finance on December 30, the yen bulls were very painful in the last quarter of 2019, but if history is any guide, then the good days may be just around the corner.

January has proved to be a lucky month for the yen, which has risen against the dollar in seven of the past 10 years. Some Tokyo-based strategists expect a repeat of this in 2020.

The possibility of a stronger yen is supported by a seasonal pattern in which the dollar usually weakens at the beginning of the year as global investors sell dollar assets to make new investments overseas, according to Oriental. The agency also expects the dollar to come under pressure as Chinese market participants close their positions ahead of the Lunar New year holiday.

"since 2014, the USDJPY has risen only once in January," said Yuji Saito, executive director of the foreign exchange department of Oriental Management in Tokyo. "with that in mind, traders may want to sell dollars at the end of the year or early next year."

Flash avalanche

The yen fell towards the end of 2019 as improved trade relations, signs of recovery in global manufacturing and decisive results in the UK general election reduced demand for safe havens.

The yen is the only Gmur10 currency that has weakened against the dollar this quarter, down 1% since September 30. But with the USD / JPY approaching the important psychological level of 110, the USDJPY's rally has gradually disappeared in recent days during the thin trading during the holidays. The yen rose against the dollar on Monday.

"people are nervous about actively buying dollars because the yen has risen strongly in January in recent years," said Takuya Kanda, general manager of Gaitame.com Research Institute Ltd in Tokyo. The flash crash in January also alarmed market participants, he said.

Opposing opinions

However, Mizuho Securities still thinks it is unlikely that the yen will appreciate next month.

Mizuho analysts Masafumi Yamamoto and Satoshi Yamauchi wrote in a report this month that the yen strengthened in January in recent years after short positions were close to or above the closely watched level of 100000 contracts, but this time this did not seem to be the case.

Net short positions in yen non-commercial futures totaled 42062 contracts in the week ended December 17, compared with 99089, 116086 and 87009 in the last week of 2018, 2017 and 2016, respectively.