Japanese yen exchange traded fund traders could see more weakness ahead, with hedge funders betting on rising inflation in Japan and tapering in the U.S.
Futures traders pushed net shorts – bets that the yen will fall against the U.S. dollar – to the highest since July 2007, reports John Detrixhe for Bloomberg.
“Everybody likes dollar-yen higher,” Brad Bechtel, the managing director at Faros Trading LLC, said in the article. “And everyone has it on.”
George Soros reportedly made $1 billion between November 2012 to February 2013 on bets against the yen. Soros’ former chief strategist, Stan Druckenmiller, the founder of Duquesne Capital Management LLC, is “short some yen,” while being “long some Japanese” stocks.
The Bank of Japan has enacted an aggressive $70 billion monthly bond purchasing program since April to depreciate the strong yen currency, stimulate economic growth and reverse deflationary pressures. Consequently, the yen has declined 15% this year, the fastest drop since 1979.
The Bank of Japan has set an inflation target of 2% in two years. Governor Haruhiko Kuroda expects the target will be achieved sometime late in 2014 or early 2015. To put this in perspective, consumer prices have been declining 0.1% per year over the past 15 years. [Next Year Could be a 2013 Sequel for Japan ETFs]
Speculation that the Fed could taper its $85 billion a month bond purchasing program has also weighed on the yen against the U.S. dollar – tapering would reduce the supply of U.S. dollars in the economy and strengthen the U.S. dollar against foreign currencies. Fed minutes indicate they could reduce stimulus “in coming months” as the economy improves. [Yen ETF Investors Say ‘Sayonara’ in Risk-On Environment]