Market News

By Daisuke Sakai

(Bloomberg) -- Foreign-exchange margin traders in Japan unwound long yen positions as the currency strengthened past the key psychological level of 140 yen per dollar on Monday for the first time in a year. 

Net-long positions for the yen against the dollar decreased to a level not seen in about four months on Monday, according to data from the Tokyo Financial Exchange’s FX trading platform Click 365. 

The number of open positions for buying dollars and selling yen also increased to a level not seen since late July, indicating that individual investors moved to sell yen in response to its five-day rally against the dollar. Japan’s currency dropped 0.1% to 140.54 per dollar as of 2:46 p.m. in Tokyo.

Individuals in Japan account for approximately 30% of currency transactions worldwide by retail investors, according to a BOJ report. The trading volume for over-the-counter foreign exchange margin trading in July was about ¥1,455 trillion ($10.35 trillion), according to figures from the Financial Futures Association of Japan. That’s the largest amount since the the data started in November 2008.

Individual players tend to take a contrarian positions, strategists said. The yen’s approach last week toward 140.25, which was the highest since December at that point, probably caused investors to “expand their trading volume and buy dollars and sell yen because of the price level,” said Tetsuya Yamaguchi, the chief technical analyst at Fujitomi Securities Co.

However, there is now a “a high possibility that the yen will continue to appreciate and the dollar will continue to depreciate” due to the divergence between monetary policies in Japan and the US, where the Federal Reserve is expected to cut interest rates this week, Yamaguchi said. 

“There is a risk that those who have taken a contrarian position and sold the yen will be forced to buy the currency to cut their losses,” he said.