Yen Bounces Back as Traders Rethink Bearish Bets
The yen has been experiencing a significant shift in market sentiment, as traders are rethinking their years-long bets against the currency.
After hitting a four-decade low against the dollar, the yen is on track for a roughly 2-per-cent surge against the greenback this week, its biggest gain since a joint U.S. and Japan intervention at the end of July to lift the yen.
The Bank of Japan's expected rate hike by 25 basis points (bps) in September is adding another layer of risk to shorting the yen, according to Rong Ren Goh, a fixed income portfolio manager at Eastspring Investments. The BOJ's key rate would then be 1.25 per cent.
A 50-bps hike or a series of rapid increases in coming months are also being contemplated by markets, although a 50-bps September hike is still seen as extremely unlikely under Governor Kazuo Ueda's cautious leadership.