Yen Bulls Bruised by BOJ, But Intervention Could Prove Them Right

Futures traders loaded up on Japanese yen ahead of the Bank of Japan meeting, but a slightly dovish rate hike saw USD/JPY push higher. Despite this, record speculative yen longs and USD/JPY testing 158 raise concerns about further intervention.

Speculators added bullish bets at their fastest weekly pace on record, increasing by 59k contracts, or 33.1%, from the week prior. Combined with asset managers, whose gross longs rose by 41.3k contracts (53.2%), total bullish exposure has reached new heights.

The threat of intervention looms large, particularly given the wide rate gap between Japan and the US. A Rabobank three-month FX forecast puts the US Dollar to Yen exchange rate at 154.00, below Friday's close near 156.88.