April 28, 2010 – Ganging Up on the Yen

Featured Trades: (YEN), (YCS), (YUAN), (CYB)


3) Ganging Up on the Yen. My old friend, Eisuke Sakakibara, Japan’s former vice minister of finance and director of the IMF, also known as ‘Mr. Yen,’ believes that the Japanese currency is going to trade in a ¥92-¥97 range. That will frustrate hedge funds that pile on enormous short positions betting that the Japanese currency will plunge to ¥100 in the near future. He also thinks that the Chinese government will appreciate the Yuan (CYB) by 5% by the end of June. The market may be waiting until Friday for the yen’s next down leg, when the Bank of Japan meets to consider interest rates. With deflation in Japan now accelerating to the downside, you can expect the current near zero rates to remain etched in stone. The Tokyo CPI is expected to show a 2.2% YOY decline in its next month report. Last week, the 50 day moving average for dollar/yen crossed the 200 day, the first such reversal since September. With speculative short positions in the futures markets now at 50,300 contracts, a three year high, this has not escaped the notice of the big hedge funds. Keep trading the yen (YCS), selling every decent rally, and buying the dips. Also, keep trading the Aussie/yen cross from the long side, which I have been going on about for some time now.

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