JPMorgan Flags Yen Short Position Risk as Dollar-Yen Hits 160.39
JPMorgan Chase strategists have sounded the alarm on the yen's recent rally, warning that a further unwind of short positions could accelerate its gains if dollar-yen breaks below 155. According to the bank, between ¥16 trillion and ¥17 trillion of bearish yen positioning remains outstanding in the market, with a complete unwind theoretically capable of pushing dollar-yen into a 142 to 146 range.
The warning comes as the yen has seen one of its sharpest rallies since Japan and the US jointly intervened to support it in late July. Dollar-yen climbed as high as 160.39 earlier this week, its highest level since that intervention, before reversing sharply to trade as low as 155.30.
JPMorgan views current expectations around both the Government Pension Investment Fund's asset reallocation and the pace of Bank of Japan rate hikes as somewhat overdone, and sees a low probability of dollar-yen falling materially below its assumed range of 155 to 165 for now.