Instant view- Japanese yen surges, traders use soft inflation to punish dollar
2024.07.11 10:02
(Reuters) – The Japanese yen jumpedon Thursday, in a move traders said was most likely the result of dollar selling after a weak reading of U.S. consumer inflation, rather than official intervention from Tokyo authorities.
The more than 2% jump in the yen following the monthly U.S. data release rang alarm bells for a market that was already wary of the risk of Japanese official buying as the currency has recently plumbed 38-year lows.
The dollar fell as much as 2.1% to 158.3 yen.. It was last trading at 158.78 yen, down 1.84% on the day.
The yen strengthened across the board and the euro was down around 1.2% at 173.26 yen
COMMENTS:
KENNETH BROUX, HEAD OF CORPORATE RESEARCH FX AND RATES, SOCIETE GENERALE
“It’s certainly a big move but I don’t think we can say it’s anything to do with intervention,” said Societe Generale (OTC:)’s head of corporate research FX and rates Kenneth Broux.
“The US CPI has been a trigger and it’s more about stops being triggered than intervention,” he said.
STEVE ENGLANDER, HEAD, GLOBAL G10 FX RESEARCH AND NORTH AMERICA MACRO STRATEGY, STANDARD CHARTERED BANK NY BRANCH, NEW YORK
“Obviously the yen story has been a rate differential story and positions – long dollar/yen positions – have piled up. So when you get a number that’s this definitive in terms of making, say, September highly probable and kind of reinstating the disinflation story, that rate differential story erodes. Most likely it was cleaning up of positions because my sense from clients, especially short-term traders, is that everybody had some long dollar/yen on that they were thinking that maybe 165 or higher was kind of where it was headed.”
“There’s some vague speculation on intervention, just everybody’s looking at the price chart and kind of saying, oh, that’s, kind of a sharp drop so maybe could have it been. The answer is it could have, but I’d say most likely its position squaring rather than any official moves.”
LEE HARDMAN, SENIOR FX STRATEGIST, MUFG, LONDON
When the market is heavily positioned in one direction and then it goes the other way it can trigger this kind of abrupt move. Dollar/yen long positioning was very stretched
COLIN ASHER, SENIOR ECONOMIST, MIZUHO, LONDON
“Most likely, it’s just short covering, as speculation of US rate cuts on the horizon build in the wake of the negative CPI print.”
” is the G10 pair where positioning is most stretched.”
“It’s certainly a sizable move, with the intra-day range the biggest since the intervention at the start of May.”
