US funds increase bearish bets on yen
The traditional haven regained buyers after the global banking crisis, as Bloomberg boosted their bearish bets on the yen to a nine-month high last week.
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The data from the Commodity Futures Trading Commission shows that funds increased net-short positions to the most since June in the week to March 21, the most since June. It is likely that it has been a painful trade - the Japanese currency extended its March gain to 4% last week after a government-brokered deal to rescue Credit Suisse didn't seem to assuade concerns that stress in the banking system wouldn't spread.
Fast money funds may have been betting that a more hawkish Federal Reserve would boost the dollar and weigh on the yen. Pressure on the Japanese currency has benefited from the surge in demand for haven assets amid the banking fallout due to the slump in global yields.
On Friday, Goldman Sachs Group Inc. strategists, including Kamakshya Trivedi, said that we were pushing back on the growing consensus for yen strength, because of our view of solid economic fundamentals, specifically our call for US growth resilience and a somewhat hawkish Fed. We see a reason to expect the reverse in the very short term. The currency traded between gains and losses in early Asia trading as markets remain jittery over the prospect of a US recession. Morgan Stanley expects the yen to trade towards 120 per dollar, benefiting from a so-called soft landing where the US doesn't derail global growth or a flight to haven assets should global growth deteriorate.
It will take at least a few weeks to see whether the Ides of March volatility has a significant impact on the data path, strategists led by Matthew Hornbach wrote in a note to clients, referring to US economic data. A neutral FX position with a short USD JPY hedge seems to be the most appropriate position while we wait for clarity. Regulators Can't Keep Up With None ChatGPT Advances Are Moving So Fast