The yen-dollar monthly trading range in October narrowed to ¥2.87, its smallest in four and a half years, as yen selling declined sharply. The background included foreign-exchange intervention by both governments and risk aversion in the market.
The yen-dollar exchange rate moved between the low ¥156s and the high ¥158s in October, with the monthly trading range narrowing to ¥2.87, its lowest level in four and a half years. Yen depreciation and appreciation were evenly matched, leaving the market without a clear direction.
According to CFTC data, hedge funds’ net short yen position stood at approximately 14,000 contracts as of 27 October, equivalent to about ¥180 billion. The position had reached approximately 115,000 contracts at its peak at the end of June, but has now contracted to about one-eighth of that level.
The sharp decline in yen selling is primarily attributed to foreign-exchange measures by the U.S. and Japanese governments. As the impact of yen-buying intervention and market efforts to restrain yen depreciation continued, investors were reportedly becoming less willing to increase their yen-selling positions. Exporters’ dollar selling is also trending higher, although the outlook for a return toward ¥160 remains uncertain.
While demand for the yen as a safe-haven asset is increasing, the market remains focused on upward pressure on oil prices, U.S. interest-rate trends and the Bank of Japan’s policy response. Many expect the yen to continue trading within a narrow range for the time being.