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Yen Traders Eye Further Official Warnings, Border Opening Moves

·2 min read

(Bloomberg) -- Japan’s FX traders waited for further signs of verbal intervention Monday as the currency pared the modest rebound seen at the end of last week.

The yen slipped 0.3% after closing up more than 1% Friday amid broad dollar weakness. Investors also mulled the impact of media reports that Japan’s border restrictions may ease, which some analysts have said could bolster the beleaguered currency.

On Sunday, Deputy Chief Cabinet Secretary Seiji Kihara said during a TV program that Japan has “to take necessary steps while closely monitoring developments including excessive, one-sided moves in the exchange rate.” His comments came after officials delivered their strongest warning yet on the yen’s slide, including Bank of Japan Governor Haruhiko Kuroda.

“Market players have become more wary that Kuroda has joined the warning given his long experience in currency markets including actual intervention,” said Kengo Suzuki, chief market strategist at Mizuho Bank in Tokyo. “Dollar-yen has come to levels to warrant caution as everybody is thinking the pair can’t move the way it did the first part of this year in the second half.”

While an actual intervention in the market to buy yen is still seen as an unlikely option, analysts have pointed to other measures Japan can use, including opening borders.

Japan is planning to allow foreign visitors book trips directly and travel freely within the country, relaxing current rules that required them to use a travel agency, broadcaster FNN reported. The government is planning to scrap a 50,000 people-per-day cap on overseas arrivals by October, the Nikkei said on Sunday.

Some investors such as BlueBay Asset Management see the time as ripe to take long positions in the yen, betting Tokyo will be forced into curbing further weakness.

BlueBay Bets on Yen Bounce in Wager FX Intervention Is Near

Still, the bearish sentiment toward the yen is strong given the monetary policy and yield divergence between Japan and the US. Asset manager net-short yen positions hit a record last week, while leveraged funds boosted theirs by the most since March, according to the latest data from the Commodity Futures Trading Commission.

The currency has fallen more than 19% this year.

“We remain comfortable with our bearish yen view even after the latest move,” wrote Goldman Sachs Group Inc. strategists including Kamakshya Trivedi in a note Friday. “But we think that the debate around the risks of intervention and a possible monetary policy shift will become increasingly in focus as we hit higher levels,” in dollar-yen.

(Updates throughout.)

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