JPY strength
September 15th, 2008 · No Comments
- JPY is surging across the board in the current environment of risk reduction
- It is continues to see risks skewed toward further force liquidation related to margin calls of high yielding currency positions on the part of Japanese retail investors, particularly NZD/JPY.
- That unwinding will be excerbated by Japanese repatriation in the lead up to the fiscal half year-end in September.
- The chart below highlights the period of the sub prime meltdown in mid 2007, which also happened to coincide with the lead up to fiscal half year end, and significant repatriation flows back into Japan (bond flows increased by a factor of 15)
- Total JPY shorts held by retail investors on the TFX halved in that period.
- Given the still skewed nature of retail positioning toward JPY shorts and the looming Japanese fiscal half year end, market expects the pressure will remain toward JPY strength.
- As highlighted previously, long NZD/JPY positioning is most extended and therefore most at risk.
Tags: USDJPY
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