Yen Carry Trade Wanes as Speculative Longs Plummet by 40%
The yen's recent rally is losing steam as speculative net-long JPY positions plummeted by 40% in the latest CFTC data. The rapid retreat of aggressive unwinding of the yen carry trade has paused, relieving immediate upward pressure on the currency.
The CFTC data show that Japan-related non-commercial net positions declined to ¥72k from ¥120.4k previously. This massive shift in market sentiment suggests that derivative traders should interpret this as a clear signal that the yen's recent rally is losing its steam.
In the coming weeks, VT Markets recommends shifting away from outright long JPY positions and instead looking to sell JPY call options to collect premium. With the implied volatility of USD/JPY remaining elevated, option sellers can benefit significantly from a stabilizing spot price.