(Bloomberg) -- Investors have piled on the most wagers for the yen to fall in 17 years, just as it teeters near a key level that would increase the risk of intervention from Japan.
Net yen shorts held by leveraged funds and asset managers rose to 148,388 contracts during the week ending April 2, the highest since January 2007, according to the latest Commodity Futures Trading Commission data.
The short bets are ramping up despite repeated warnings from officials on Japan's currency slide, underscoring investors' convictions that the yen has room to weaken further given the nation's yawning interest-rate gap with the US.
“I don't think economic indicators or even a statement from a BOJ official will be enough to turn them into yen buyers,” said Marito Ueda, head of the market research department at SBI Liquidity Market. “A little more yen selling could build up, but it is likely to clash with the timing of intervention by the Japanese monetary authorities.”
The beleaguered yen is near a 34-year low, revealing how the Bank of Japan's first rate hike in 17 years has done little to change the prevailing market dynamics dominated by the Federal Reserve. It traded little changed around 151.70 at 9:46 a.m. in Tokyo on Monday.
The currency's weakness has prompted repeated warnings by officials, who have pledged to act against excessive moves — a risk that could rip through currency markets as the yen remains one of the most-traded currencies in the world.
US inflation data due on Wednesday provides a potential trigger for sharp moves in the yen, with any signs of strong price growth bolstering bets the Fed won't rush to rate cuts.
“Increased speculative yen selling driven by an expected delay in the contraction of interest-rate differentials” between the US and Japan is boosting dollar-yen to multi-decade highs, Koji Fukaya, a fellow at Market Risk Advisory Co. in Tokyo, wrote in a research note.
--With assistance from Masaki Kondo.
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