USD/JPY: Dollar Settles Near ¥151.00 as More Hedge Funds Bet on Further Yen Losses

Money managers are convinced that the Bank of Japan won’t move too far from its accommodative policies in the foreseeable future.

Key Points:

• Dollar gains pips against weaker yen.
• FX hedge funds ramp up bullish bets.
• PCE data on deck for Friday release.
• The USDJPY pair was floating unbothered around the ¥151.00 level early on Tuesday with traders looking for another leg up in the exchange rate. According to the Commodity Futures Trading Commission (CFTC), forex-trading hedge funds increased their long bets (that is, short yen) last week when the Bank of Japan ditched the yield curve control and hiked interest rates for the first since 2007.
• The CFTC said in its report that money managers ramped up their contracts tied to bets of falling yen to 80,805, nearing the six-year high of just over 83,000 reached last month. Still, a bet is only a speculative wager that could turn against you. Things can really go off especially if you’re trying to outsmart the Bank of Japan. There’s a reason markets have coined the term “widow maker” trade.
• With that in mind, the USDJPY pair has appreciated by about 0.5% from last week’s Bank of Japan hike. Moreover, it’s up by 3.3% over the past 11 trading sessions with just two red days. Stateside, the Federal Reserve’s preferred inflation measure—PCE—is on deck for release on Friday. The gauge is expected to show price pressures moderated to 2.8% in February, flat from January.