Japanese policy makers unlikely to change the trend of JPY weakness – Nomura

FXStreet (Barcelona) - According to Yujiro Goto, FX Strategist at Nomura, Japanese policy makers are unlikely to change the JPY weakness trend, and USD/JPY will likely remain a buy on dips as margin traders have increased their long positions on the pair.

Key Quotes

“As USD/JPY’s appreciation has accelerated there have been a couple of comments on the FX market from policy makers, but we think they are unlikely to change the trend of JPY weakness anytime soon.”

“BOJ Governor Kuroda had a meeting with Prime Minister Abe. After the meeting, Mr. Kuroda said the meeting was a regular meeting with PM Abe and he did not discuss FX with him. He repeated that it is desirable for FX moves to be stable and that FX reflects economic fundamentals, but he declined to comment on the FX level and speed.”

“Finance Minister Aso said he will carefully watch FX movements, but declined to comment on JPY movements as well. Japanese policymakers’ stance on JPY has not changed.”

“JPY short positions at IMM have been recovering recently, while Japanese margin traders’ net USD/JPY short positions are estimated to be the biggest in years. Speculators’ JPY short positions totalled $6.3bn as of last Tuesday, the biggest net short positions since end-January. In contrast, Japanese margin traders’ USD/JPY positions are estimated to be -JPY586bn (- $4.7bn) as of yesterday, while USD/JPY long positions had reached JPY1588bn as of end-April.”

“As contrarians, margin traders may be dip buyers of USD/JPY going forward, while their positioning suggests limited USD selling by them.”

“While USD/JPY appreciation momentum may slow ahead of the US NFP, USD/JPY is expected to trade well for the time being.”