Bank of America Securities suggests that further weakness in the Japanese yen is likely, based on its latest foreign exchange and rates sentiment survey. At the time of reporting, the USD/JPY pair was trading 0.2% higher at ¥155.83, having experienced nearly a 2% increase over the week due to renewed weakness in the yen.
In the previous week, Japanese authorities reportedly spent around $60 billion to prevent the yen from reaching a 34-year low of ¥160.24 against the dollar.
The survey conducted by Bank of America Securities has consistently shown a bullish bias towards the yen since mid-2022, until recently. The analysts note a significant shift in sentiment, with investors now holding the largest short position on the Japanese yen since 2022. There is widespread skepticism regarding the effectiveness of Japan’s intervention in the foreign exchange market.
With the USD/JPY pair reaching new highs in April, many fund managers surveyed anticipate the pair to retest the ¥160 level, with no one predicting a reversal to ¥150.
While Bank of America Securities generally agrees with these views, they advise caution for short positions in the near term due to the recent shift in sentiment regarding the Japanese yen.