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Hedge funds place record bullish yen bets amid volatility surge

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Hedge funds and other large speculators boosted wagers to the highest since at least 1992 that the yen will strengthen versus the US dollar after Japan's currency rallied to a 17-month high last week.

[TOKYO] Hedge funds and other large speculators boosted wagers to the highest since at least 1992 that the yen will strengthen versus the US dollar after Japan's currency rallied to a 17-month high last week.

The yen was within 0.1 per cent of its strongest against the greenback since the Bank of Japan increased stimulus in October 2014 as speculators defied rhetoric from Japanese authorities aimed at checking its advance.

Deutsche Bank AG and Bank of Singapore said the yen remains at or below fair value, even after it gained for a sixth day on Friday, the longest winning streak in a year. The currency's surge helped send a gauge of foreign-exchange volatility toward a four-year high.

"The yen is nowhere near overvalued," making it hard to justify intervention, said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore. "Even though the yen has moved quite substantially against the dollar, you look at yen relative to euro and other currencies it hasn't really strengthened all that much."

sentifi.com

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The yen appreciated 0.3 per cent to 107.80 as of 10.22am in Tokyo after advancing to 107.67 on April 7, the strongest level since Oct 27, 2014. The currency gained 0.2 per cent to 122.95 per euro.

"Japan's biggest problem with the current yen rally is that it is justified by fundamentals," George Saravelos, a strategist at Deutsche Bank in London, wrote in a client noted dated April 11. The yen is "still expensive or only just approaching fair value" against the dollar on most of our metrics, he wrote.

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