Will speculators rebuild yen short wall?
August 12 (Reuters) - As foreign exchange traders view the ruins of the metaphorical yen short wall bulldozed by aggressive carry trade unwinds, the question is being asked: will speculators rebuild it?
CFTC data on FX positioning showed the net JPY short shrank for a fifth consecutive week to 11,354 contracts, its lowest since March 2021, in the week ended Aug. 6 - a period which encompassed the USD/JPY slump to a nine-month EBS low of 141.67. When USD/JPY was close to 162 at the start of July, the net yen short position totalled 184,233 contracts, its highest for 17 years.
The recent clear-out of JPY shorts offers a clean slate for speculators who foresee an echo of price action after a prior bout of yen-funded carry trade unwinds in late 2023 - which deflated USD/JPY to a low near 140.
USD/JPY bull targets include 150 and 155 - a level at which it most recently traded on July 30 (day before Bank of Japan's hawkish rate hike).
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(Robert Howard is a Reuters market analyst. The views expressed are his own)
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