JPY: Strength predicated on a big market long of the currency - SocGen

Kit Juckes, Research Analyst at Societe Generale, notes that in the week to May 20, Japanese investors bought Y684bn in foreign bonds, taking purchases this year to Y11trn, more than twice as much as they had bought in the same period last year.

Key Quotes

“How on earth can I be bearish of a currency whose investors ship money out at that rate (nearly 50% above the run-rate of the current account surplus)? Annual purchases are over Y20trn and if I include buying of foreign equities, and subtract foreign buying of Japanese bonds and equities, the annual total is now running at Y26trn.

These figures are worth highlighting not because they tell me where the Yen is going today, but because they show that yen strength is now predicated on a big market long of the currency. That long can grow on risk averse days (and on days like today when there are nerves about the Chinese economy) but I’ll only really push fresh yen longs either at cheaper levels or , at least, after positions have been cut back.”