- Hedge funds ramp up yen buying
- Markets await Jerome Powell’s comments at Jackson Hole
The Japanese yen rose in the Asian market on Monday at the beginning of the week against a basket of major and minor currencies, to continue moving in positive territory for the second consecutive day against the US dollar, amid increasing bullish bets on the Japanese currency, especially with the intensification of hedge funds from yen purchases.
The US currency continues to decline in the foreign exchange market, with the Federal Reserve approaching monetary policy easing and cutting interest rates starting next September, waiting for Jerome Powell’s comments this week at the Jackson Hole Forum, in search of new evidence about the size of possible cuts before the end of this year. Level at (¥148.05).
The Japanese yen ended Friday’s trading up 1.2% against the dollar, the first loss in the last three days, as part of the recovery from a two-week low of 149.40 yen.
Over the past week, the yen lost 0.65% against the dollar, its second consecutive weekly loss, due to less aggressive comments from Bank Japan, which reduced the likelihood of further increases in Japanese interest rates before the end of this year.
According to one important metric, the curry-yen deal has been completely dismantled, as the latest CFTC data shows that hedge funds and speculators have reversed their long-term positions on the Japanese yen, and are now in net buy positions for the Japanese currency for the first time since March 2021.
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It may have taken a lot in recent weeks to spur this shift, raising Japanese interest rates in a hawkish way, intervening to buy yen, and increasing safe-haven demand amid historic volatility in the US stock market at the beginning of this month, but the shift was fast.
Data for the week ending August 13 shows that the funds hold a long position of more than 23,000 contracts, which is essentially a bullish bet on the currency worth 2 billion USD, seven weeks ago, they were in net short positions of about 184,000 lots, their largest short position in 17 years, a bet against the currency worth 14 billion USD.
Analysts at Rabobank said the yen was the best performing currency among the Group of Eight currencies against the dollar in July with a rise of more than 7%. But the Japanese currency began to decline again as the volatility shock faded on August 5 and investors regained their risk appetite.
The dollar index fell on Monday by more than 0.2%, extending losses for the second consecutive session, hitting a two-week low of 102.19 points, reflecting the continued decline in the greenback against a basket of major and minor currencies.The minutes of the Federal Reserve’s monetary policy meeting in July and Federal Reserve Chairman Jerome Powell’s speech in Jackson Hole are likely to be the main drivers of the greenback’s movement this week.
The comments of the Federal Reserve and Jerome Powell are likely to provide more strong evidence about the size of potential US interest rate cuts this year, in light of the recent slowdown in prices and inflation in the US.
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