Over the first several months of the year, Japan was a one-way street.
The Nikkei would gain and the yen would weaken.
The Bank of Japan’s aggressive easing platform got everyone betting on Japanese assets (stocks, mostly), while also betting that the yen would go down.
But lately everything’s reversed.
Stocks are tanking, and the yen is jumping
Several days ago, USDJPY (the dollar vs. the yen) was around 104. Today it’s below 95, indicating a massive strengthening of the yen.
And that’s brutal.
As this chart from Nomura shows, shorting the yen has been a wildly popular trade among speculators, as net short positions (red line) against the yen are near their most extreme levels in years.
The violent reversal, the yen surge, is causing all kinds of pain.
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