USD/JPY Market Sees Surge Despite Employment Data Decline

The Japanese yen has become increasingly vulnerable due to the actions of speculators in the USD/JPY market. Despite the recent decline in US employment, which triggered a massive sell-off in the US dollar, speculators quickly bought the dip and pushed the pair back up.

According to Bloomberg, the joint intervention by Tokyo and Washington has significantly thinned the ranks of speculators, but it has done little to curb their appetite for the USD/JPY. Hedge funds' net short positions in the yen have fallen by half from their 2007 peak, indicating a reduced level of speculation.

The carry trade continues to favor the USD/JPY due to its wide interest-rate differential, which supports demand for carry trades and encourages large-scale selling of the yen as a funding currency. Japanese automakers expect the US dollar to trade in the ¥157-160 range over the next 12 months.