During early activity today, the Japanese yen slid to its lowest level since June 2009 against the US dollar; Japanese Yen traded to a low of 98.85. The weakness is is a result of recent action from the Bank of Japan’s first round of unlimited monetary easing April 4 by buying 1.2 trillion worth of debt. The yen may soon slide past the 100 USD, a strategic area, as BoJ fuels up its 130 trillion yen stimulus program.
The yen hitting new lows, may not have been the best news for the hedge funds who had covered their shorts in the the last few weeks. Large speculators covered shorts in yen to $10.5 billion from $11.8 billion notional in the seven days ending April 2.
BAML’s Currency Strategy also noted that even though the net short position of hedge funds was short in Japanese Yen, they were covering yen short positions over the past week. Hedge funds have tilted towards buying EUR/JPY.
As for other currencies, the euro is edging closer to the crowded short zone, hedge funds increased their short bets by 33 percent in the same week. According to BAML, overall hedge funds remain oversold in EUR, a trend that could likely reverse in the next few weeks. One of the indicators is, EUR $2.2 billion in corporate M&A was announced in last week, which is the largest in G10.
Contrary to the above positioning that is concentrated in the U.S., the exposure is decidedly different in Asia. JPY buying peaked across domestic real money and retail clients. Meanwhile EUR appreciates against the JPY which is driven by real money clients selling Japanese government bonds and buying Bunds in place.
Other notable movements were, CAD & MXN buying fell to zero which were the major currencies of interest previously. Based on these changes, a long USD/CAD position was initiated by Bank of America. Selling in AUD/NZD has continued in the past week and is likely to go further.