Japan’s retail traders bet on yen rebound

Japanese retail investors are piling back into bets on the yen, hoping for another government intervention to strengthen the currency.

Data from Tokyo Financial Exchange shows bullish positions on the yen against the dollar have been building since mid-May through futures contracts popular with individual investors.

These bets dipped sharply in late April and early May, coinciding with the time frame when Japan is believed to have intervened in the market to support the yen. This suggests that retail traders likely sold the yen to lock in profits.

With the yen weakening back towards 160 yen to the dollar, retail traders are eager for another intervention, according to Takuya Kanda, head of research at Gaitame.com, a Japanese online brokerage.

Trying to profit alongside government intervention is risky, especially for those using leverage. Some investors were burned in April and May when the Ministry of Finance intervened. However, others who timed it right made significant gains.

“I have to say, thank you MOF,” said Keisuke Oikawa, a 58-year-old Japanese retail investor based in Singapore. Oikawa said he made about ¥1.5 million ($9,400) from various trades capitalising on market fluctuations around the intervention.

Japan’s top foreign exchange official suggesting continued action to address excessive yen weakness, could further encourage traders. This comes despite being placed on the US Treasury Department’s currency monitoring list.

The number of currency trading accounts in Japan surged to a record 12.4 million last year, according to Gaitame.com. While individual positions may be small, collectively they hold significant weight. Research from Japan’s central bank shows domestic investors account for nearly 30 per cent of global retail forex trading.

Government figures reveal that Japan spent a record 9.8 trillion yen to support the yen between April 26 and May 29. Exact intervention dates haven’t been confirmed, but market movements point to April 29 and May 1.

Investors who positioned themselves early for intervention or bought yen quickly after the government’s move and then sold for profits before the retreat, did well. The yen closed Friday at 159.80 to the dollar.

Attribution: Bloomberg