The unwind of carry trades has accelerated, bringing the yen close to a one-month high against the dollar. Market activity has intensified amid expectations of a BOJ rate hike and remarks from senior officials.
The unwind of carry trades using the yen as a funding currency has progressed, bringing the yen close to a one-month high against the dollar. The move was driven by remarks that strengthened expectations for an additional BOJ rate hike.
According to CME data, yen call options against the dollar expiring this month outnumbered puts by more than 2.5 to 1, as yen short positions continued to be unwound.
Sagar Sambhrani of Nomura International said demand for yen holdings could exceed that for other G10 currencies over the medium term, and suggested that the scale of capital outflows from Japan to the United States has changed.
Over the longer term, views are increasingly emerging that the BOJ's rate-hike coordination and rising interest rates will affect the yen exchange rate and the direction of market volatility.