Speculative traders became the most bullish on the yen on record as President Donald Trump’s trade war drives the selling of U.S. assets and boosts haven demand.
The yen climbed to its strongest level since September against the dollar on Monday, briefly trading in the range of ¥140. The move comes ahead of a meeting between the finance chiefs of Japan and the U.S. that’s reported to come this week.
Net long positions on the yen among asset managers and leveraged funds climbed to an all-time high last week, according to data from the Commodity Futures Trading Commission as of April 15. At the same time, bearish dollar positions increased further.
The sell-dollar trade also gathered momentum as Trump publicly criticized Federal Reserve Chairman Jerome Powell and contemplated whether he’s able to fire him.
Japan’s currency has appreciated for three consecutive weeks against the dollar as the uncertainty surrounding the global trade war bolsters haven assets. Mizuho Securities recently lowered its year-end dollar-yen forecast to ¥133 amid the tariffs, while Nomura Securities said it now sees the pair hitting ¥137.50.
"The risk of yen buying is considered low, and it’s natural to view yen selling and dollar buying as risky,” Koji Fukaya, a fellow at Market Risk Advisory in Tokyo, wrote in a note. "In such an uncertain and volatile environment, the importance of interest rate differentials declines, and Japan is tolerating a strong yen while the U.S. is hoping for a weaker dollar and stronger yen.”
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