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Asia markets tentative ahead of Opec meeting

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

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Categorized | Currencies

Mrs Watanabe’s yen trade comes unstuck amid dollar surge

Posted on November 23, 2016

Japanese retail investors who have been betting on a rebound in the yen against the dollar are getting their fingers burnt.

The Japanese currency fell by as much as 1.7 per cent on Wednesday to just under 113 per dollar, an eight month low, after stronger-than-expected US economic data sent the greenback surging against all its G-10 peers.

The sell-off comes as data from Japanese electronic trading platform Click365 showed net short position held by the country’s legion of mom and pop traders against the dollar stood at $1.26bn as of November 15, a sharp rise from the mere $22m record just a week earlier.

The jump reflects the view among retail investors – dubbed Mrs Watanabe due to the perception that women manage the household savings in Japan – that the yen’s drop against the dollar is bottoming out after falling some 4 per cent in the week following the US elections.

Afterall, most analysts in Japan had predicted ahead of the elections that Donald Trump’s victory would create uncertainty and cause the yen, a haven currency, to strengthen further.

But instead, Wednesday’s decline now takes the yen’s losses since the November 8 elections to 7 per cent – making the currency the biggest loser against the dollar among Asian and G-10 countries. Its decline also eclipsed those recorded by the Brazilian real and South African rand during the period.

Heavy losses for Mrs Watanabe may further emboldened hedge funds to ramp up their bets against the yen.

Data released last week by the Commodity Futures Trading Commission showed that noncommercial traders such as hedge funds cut their net long positions on the yen to just 20,676 futures contracts as of November 18, the lowest level since May.