Speculators praying for Japanese FX intervention
Oct 18 (Reuters) -Traders who have sold short USD/JPY will be praying that recent warnings about a one-sided yen move are not just hot air, but actually result in an intervention that may save them from bigger losses.
Traders are definitely losing as the rise from 139.58 on Sept. 16 has gone beyond the 149.40 recovery peak, traded after the Japanese central bank tweaked policy in July, to reach 150.32 this month.
Many shorts were established towards recent lows and the squeeze of these distressed bets has prompted warnings about the one-sided nature of moves that are the result of the actions of the policymakers who are worrying.
Tighter policy spurred a rapid change in sentiment and positions from huge yen shorts to bets on yen rising. It also prompted a plunge for Japanese equities that clearly worried policymakers who have since made it clear that while policy will change it won't happen quickly.
They don't want to shock again.
If so, the polices weighing on the yen will continue to do so, and should the authorities deem that intervention is needed to boost the yen, they will give traders who have wrongly bet on a rise a chance to exit trades more cheaply, or perhaps even to profit.
It is unlikely that policymakers will act in support of speculators, and until traders are betting heavily against the yen, any intervention is likely to be much less effective than that seen earlier this year. By the time traders have sold enough yen to make intervention effective, it may have dropped much further.
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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
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