LIVE MARKETS-Who's afraid of Japan's big, bad MOF

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WHO'S AFRAID OF JAPAN'S BIG, BAD MOF?

Not yen traders, that's for sure.

As the Japanese currency tumbled towards its weakest against the dollar since July 2024 Tokyo officials have escalated their verbal warnings about excess volatility and "one-sided trading" - code for "speculation".

That suggests the Ministry of Finance (MOF), which executes intervention via the Bank of Japan, is getting closer to stepping directly into markets to support the currency.

Normally it isn't about a particular level, rather, the speed at which the dollar/yen pair rises, but traders are flagging 160 yen to the dollar as a level at which the MOF could pull the trigger. That's just a hair's breadth away from 158 where it is right now.

But last week's data from the U.S. markets regulator showed investors aren't showing any signs of concern about intervention. Speculators increased their bets on the U.S. currency gaining at the expense of the Japanese one by the most in a week since March 2021 to a two-month high of $3.55 billion, according to data from the Commodity Futures Trading Commission (CFTC).

CFTC data on leveraged funds, which very loosely refers to hedge funds, shows an even starker picture. Leveraged players hold a net dollar long against the yen worth $7.8 billion, having added to their short positions, which assume a drop in the value of the Japanese currency, by the most in a week since mid-July 2018 1097741LSHT

"What this very big yen selling indicates is that market participants don’t appear particularly concerned over the risk of intervention – we had already had rhetoric from Japanese authorities, although that rhetoric has intensified since last Tuesday, that covers the positioning data," MUFG head of research Derek Halpenny said.

(Amanda Cooper)

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