Hedge funds expect the dollar-yen exchange rate to fall below ¥150 by year-end, while options trades targeting the ¥140s are becoming more active. The outlook for a stronger yen and weaker dollar is gaining attention, underpinned by CME data and comments from market participants.
Hedge funds expect the dollar-yen exchange rate to fall below ¥150 by year-end, with trading volume in puts expiring by year-end exceeding that of calls. The ¥142.86 put expiring in November is the most actively traded, and the value of puts rises when the dollar declines.
According to CME data, the dollar-yen exchange rate was reported at ¥153.61 at the same time locally.
In comments made in London, Citigroup's head of Linear G10 FX Trading said leveraged investors were becoming more active and that options strategies targeting a break below ¥150 by year-end were popular.
The view was expressed that carry trades were being rapidly unwound following hawkish comments from the Bank of Japan, leading the dollar-yen exchange rate to fall sharply over the past week. ¥155 was seen as a support level, while some market participants said they were again watching levels where intervention had occurred in the past.
At Nomura, a shift toward a bearish stance on the dollar-yen exchange rate has also been identified among macro hedge funds seeking to profit from market volatility.