USDJPY: Softer USD frustrates elevated short yen speculative positions - MUFG

USDJPY was down last week because JPY has rallied as market expectations for the BoJ’s yield normalization efforts and a flexible 10Yr JGB target yield may support JPY strengthening, according to Takahiro Sekido, Research Analyst at MUFG.

Key Quotes

“Speculators unwinding their JPY short positions has been the main reason JPY has been rallying this week. Underlying and fundamental JPY buying flows among Japanese exporters and investors have weighed on USDJPY. At the same time, Japanese investors buying securities have not supported the JPY weakening, due to their prudence with continued currency-hedged trading. Japanese data due out this week could be positive, but support market expectations for BoJ normalization and weigh down USDJPY. JPY selling as well as USD strengthening is unlikely to support USDJPY.”