Investing.com – The bet on the dollar against the yen has been a hot forex trade that has dominated flows, but the trade could now head down a “treacherous” path ahead, Macquarie warns, with Japan likely to follow suit. Last week's intervention that sent the Japanese currency higher amid revived expectations of US interest rate cuts.
“It is treacherous to continue buying from a tactical point of view,” Macquarie said in a note on Monday, warning that Japan’s Finance Ministry would likely intervene again if it “sees an opportunity for a peak in yield spreads between the United States and Japan,” which pushes the The value of the Japanese yen after the US employment report on Friday.
A weaker-than-expected April jobs report released on Friday has revived hopes for faster rate cuts, with overnight swap markets now anticipating a rate cut in September rather than December, as the economy created fewer jobs than expected last month. Not only has wage growth slowed.
Data shows that labor supply and demand are in better balance, Federal Reserve Chairman Jerome Powell justified recent statements by saying that the labor market is not as tight as…
It was, Macquarie added.
After a significant rise in labor supply, supported by Given the strength of migration flows, the focus should now shift away From “job growth and toward measuring turnover and wages.” “The Fed acted,” Macquarie said.
This new supply and demand model in the labor market has helped support salaries and made the labor market more competitive, reducing wage growth and labor turnover, which has led to less distress in the labor market.
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“We're pretty sure That's cooler The labor market is better than it was a year ago. But that's not thanks to job growth numbers; It's by virtue “Turnover and pay figures,” Macquarie added.
Additional signs of a labor market slowdown in the coming months could raise hopes for a rate cut and encourage bets that US Treasury yields have peaked, opening the door to further intervention from Japan to strengthen the yen.
However, recent data suggests that yen short sellers have not been forced to cower due to Japan's recent impromptu entry into the forex market amid expectations that interest rate hikes rather than interventions will be needed to halt the yen's decline.
There was only A “small Reduction in speculative positions on the Japanese yen Macquarie said of the Commodity Futures Trading Commission (CFTC) reports last week on traders' positions, suggesting that those who… There does not appear to be any long positions in USD/JPY. also “Affected by the interventions of the Japanese Ministry of Finance and the Bank of Japan in the currency market.”
But the risk of further intervention could eventually unsettle USD/JPY buyers The reward-risk ratio “for buying USD/JPY has become less attractive,” Macquarie said. “We doubt it More speculators will unwind long USD/JPY positions late last week “This week,” she added.