Biggest macro short is back as traders sell yen around the clock

WHEN Brian Gould steps into his office at 120 Collins Street in Melbourne, he's greeted with a slew of yen short trades.

"Sell-yen orders are coming in around the clock. In the last couple of days we've seen a lot more volume," said Gould, a 3-decade currency markets veteran and head of trading at Capital.com. "People are still wanting to buy US dollar-yen at 20-year highs."

He's not alone.

Investors from Tokyo to New York are betting on further weakness in Japan's currency, which is already wallowing at a 2-decade low against the greenback. The widening gap between yields on US Treasuries and Japanese government bonds is driving the move and shows no signs of changing anytime soon.

It's made the yen the worst-performing Group-of-10 currency this year by far, with its decline against the US dollar extending by 0.7 per cent during Asia trading on Tuesday to 132.75.

Traders are increasingly aligning with asset managers in buying US dollar-yen, according to a senior trader at a Japanese investment bank. Many are targeting the 135 level as the next milestone for the pair, said the trader, who asked not to be identified as he isn't authorised to speak publicly on the matter.

The target is echoed across trading rooms 10,000 miles away in New York.

Ben Emons, head of global macro strategy at Medley Global Advisors, says US dollar-yen will "easily" break the 135 level. Win Thin, global head of currency strategy at Brown Brothers Harriman, is also maintaining his long-standing target of 135.15 - a level last seen in January 2002.

Back in Sydney's Carrington Street, Rodrigo Catril is fielding client and trader inquiries on the yen's outlook as the currency breaks new lows against the US dollar every other day.

The "break above 132 now has many speculating on whether further yen weakness could instigate official discomfort from the US and others," said Catril, a market veteran of more than 2 decades and strategist at National Australia Bank. "US Dollar-yen remains at the mercy of 10-year Treasury yields, the resilience of the US economy." BLOOMBERG