Yen’s Rollercoaster: Insights on Market Movements
Fast Money Shorts on the Way Out
UBS Weighs In
Investing.com reports that most fast money shorts in the yen have probably been cleared out, according to UBS. This shift might mean we’ll see less wild swings in the market in the future.
The Unraveling of the Carry Trade
Bank of Japan’s Impact
The unwinding of the yen carry trade has been a big player in recent market turbulence. Last week, when the Bank of Japan decided to hike interest rates, along with whispers of Federal Reserve cuts, many traders had to rethink positions they had held for ages.
What’s the Carry Trade, Anyway?
Investors Making Moves
In simple terms, the global carry trade is when investors borrow money in places with low-interest rates and use it to chase better returns elsewhere. For years, this has often meant working with the Japanese yen, as it’s kept rates close to zero in a bid to kickstart a sluggish economy.
Monitoring the Yen Carry Trade
Analysts’ Focus
UBS analysts are keeping a close eye on how big the yen carry trade is and how much more could be unwound. They categorized it into three groups: fast money, semi-fast money, and sticky money. They believe the fast money shorts are likely out of the game now. The unwinding of the other categories should happen gradually and smoothly.
Future Predictions
What’s Next for the Yen?
UBS forecasts rates hitting ¥147 in September 2024, holding steady at ¥147 in December, dipping to ¥143 in March 2025, and dropping to ¥140 by June 2025. With the recent bounce back in USD/JPY, they suggest looking to sell the currency pair if it climbs above ¥147, considering their outlook for a long-term decline.
Market Movement
What’s Happening Now?
At 06:10 ET (10:10 GMT), USD/JPY slipped 0.4% to ¥146.10, after a steep drop to a seven-month low of ¥141.67 earlier in the week. It’s shaping up to be quite the ride!
