Margin Traders in Japan Raise Bets That Yen Will Fall Against Dollar to a Record

By Kevin Buckland and Kazumi Miura

Margin traders in Japan raised bets the yen would fall against the dollar to a record amid their currency’s best start to a year since 2010.
Wagers from individuals for the Japanese currency to decline outnumbered bets it would gain by 522,856 contracts on Jan. 15, the biggest net shorts since Tokyo Financial Exchange Inc.’s Click 365 began collecting the data in 2006. The figure more than doubled since Sept. 30 as the Bank of Japan’s unexpected Oct. 31 decision to expand bond purchases, known as quantitative easing, drove the yen to an 8 1/2-year low in 2014.
The yen has rallied 1.5 percent versus the greenback since Dec. 31 to 117.99 per dollar as of 7:35 a.m. in London, its strongest gains for that period in five years, as plunging oil and stock prices spurred haven demand. Japan’s currency touched a one-month high on Jan. 16, the day after the Swiss National Bank stunned markets by scrapping its cap on the franc.
“Since October of last year, dollar-yen trading has become extremely active, and the trend for bullish dollar positions hasn’t changed this month,” Takashi Okada, head of
Margin Contracts Marketing Group at Tokyo Financial Exchange, said by phone yesterday. “Japanese foreign-exchange traders generally take a contrarian stance, but this time they’ve aligned themselves with the market consensus.”

Franc Moves

The Japanese currency will weaken to 125 per dollar at the end of 2015, according to the median estimate of around 50 analysts surveyed by Bloomberg News. A fourth consecutive annual decline would be the longest run since the yen was freely floated in 1973.
Positions betting against the yen were pared to a net 513,181 contracts to Jan. 16, the day after the SNB ended its policy of selling the franc to stop it strengthening beyond 1.20 per euro, according to the exchange’s data. The franc rose as much as 41 percent against the euro and also climbed versus the dollar.
Japan’s margin traders are among a growing number of investors who have been caught out this year. Speculators increased wagers against the franc to the highest since May 2013 this month, while a global rally in bonds has confounded the biggest wagers against Treasuries in four years.