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LONDON/NEW YORK -The precipitous slide in Japan’s currency has run so far and fast it’s spooking big investors, and some are cutting bets that it will decline further, anticipating policymakers may soon step in to try and arrest the freefall.
Those who have sold the yen short have reaped juicy profits this year. It slumped to a 24-year low on Wednesday and has lost some 30 percent since the beginning of last year as U.S. interest rate expectations have gone up and Japanese rates have gone nowhere.
But this week’s almost 3 percent drop, without any particular trigger, was enough for some funds to call time on the first leg of their wager that Japan would have to quit its policy of capping bond yields as its global peers push rates higher.
“We think we are getting close to an inflection point of policy,” said BlueBay Asset Management chief investment officer Mark Dowding, especially as inflation starts to pick up.
“We have maintained a short stance in JGBs as an expression of this and today have actually moved long yen,” he said, referring to the government bond market.
“We think the slide in the yen has gone too far too fast and we think that we will hear something from policymakers pretty soon.”
Uneasy calm in the market after a two-session selling storm suggests the feeling is perhaps more widespread, or at least that yen shorts are wary of adding to their positions.
Positioning data shows yen shorts have been reduced steadily since April.
