Are the days of making money by shorting the Japanese yen gone forever?
html On June 10, Japan’s Ministry of Finance, Bank of Japan and Financial Services Agency issued a joint statement stating that they were “concerned” about the recent rapid decline of the yen against the US dollar. The statement also stated that the Japanese authorities will take appropriate actions on foreign exchange when necessary and will communicate closely with other countries; the Japanese government and the Bank of Japan will cooperate closely to pay close attention to foreign exchange trends and their impact on the economy and prices; stable fluctuations in foreign exchange reflect fundamentals It is very important to avoid rapid fluctuations in the Japanese yen exchange rate.was boosted by this, and the U.S. dollar fell 0.69% to 133.45 against the yen in the short term.
"verbal intervention" has been implemented. When will market intervention come?
Generally speaking, the Japanese government's intervention in the yen is usually divided into two stages: "verbal intervention" and open market intervention.
Wall Street News mentioned that it is decided by the Bank of Japan (Japan's central bank ) and the Ministry of Finance. Among them, Japan's Ministry of Finance will decide whether to intervene in the market, while the Bank of Japan will implement specific operations.
This is usually preceded by a series of carefully choreographed "verbal warnings" from relevant officials. If they say the government is not ruling out any options, or is prepared to take decisive action, they usually send a signal that puts markets on high alert that intervention may be imminent.
If "verbal intervention" is ineffective, open market intervention will be considered by policymakers. Generally speaking, in order to prevent foreign exchange intervention from affecting monetary policy, the Japanese government generally adopts sterilizing foreign exchange intervention, that is, while buying or selling foreign exchange, it sells or buys an equal amount of government bonds to withdraw funds or release liquidity. sex.
Previously, Wall Street News has conducted a detailed review of the intervention of the Japanese yen by relevant Japanese departments. Interested readers can move to "Six Questions and Answers: Will the Bank of Japan intervene in the yen?" How to do it? What are the challenges? 》.
Are the days of making money by shorting the Japanese yen gone forever?
In the morning of June 10, the yen further hit a 20-year low against the US dollar. The US dollar against the yen hit a maximum of 134.53, which is the highest level since April 2002. The yen also fell to a seven-year low against the euro. .
Against the background of the divergence of monetary policies between the Japanese and American central banks, many investors are still interested in shorting the yen. As mentioned in the Wall Street News VIP article, Brian Gould, a veteran with 30 years of experience in the foreign exchange market and the trading director of Capital.com, said:
“Orders to sell the Japanese yen are coming in 24 hours a day. In the past few days, we have seen that Trading volume has increased significantly, and people still hope to be long the U.S. dollar against the yen at a 20-year high. "
Some analysts pointed out that the days of shorting the yen may be gone forever.
Wall Street News mentioned that although the foreign exchange market continues to focus on the policy differentiation between the Bank of Japan and Western central banks, the days of shorting the yen and making money may be over. HSBC statistics show that the trading volatility of USD/JPY so far this year is 19 yen, from 113.5 to 132.7, which has narrowed compared with 23 yen in 2016 and 21 yen in 2014. The USD/JPY appreciated by 19% year-on-year, but from May to July 2015, the USD/JPY appreciated by more than 20% year-on-year, and from April to December 2013, the appreciation reached 24%. If we compare these recent historical extreme values with the current rise in USD/JPY, it is difficult to imagine that USD/JPY will rise to the 135-137 range.
In addition, a survey on the investment plan of Japan Life Company in April this year also showed that Life Company expected the trading range of US/JPY to be between 110 and 135 in the next six months.
From the perspective of trading positions, CFTC data shows that fund managers’ net short positions on the yen have reached unprecedented heights. Although leveraged fund still has room to further short the yen, HSBC’s proprietary trading data shows that in April and Speculative long USD/JPY positions have begun to decline in May.
Today, the arrival of verbal intervention may bring more pressure to the "135 milestone".
However, some analysts believe that "verbal intervention" will have little effect. As long as the Bank of Japan maintains an ultra-easy monetary policy, the yen will continue to weaken.
Jane Foley, strategist at Rabobank in London, said:
"The cost of verbal intervention is very low, and actual intervention would not only violate Japan's agreement with other G7 countries to allow the market to set the exchange rate , but also with Japan The impact of the central bank’s ultra-loose monetary policy goes in the opposite direction. As long as the Bank of Japan maintains ultra-low interest rates and yield curve control, it will be difficult for the yen to strengthen unless U.S. yields fall. ”
This article is from Wall Street Insights. Please download the APP to view it. More
