The latest IMM data cover the week from 14 April to 21 April 2015.
IMM positioning data released on Friday reveal the fourth consecutive week of short covering in speculative JPY positioning. As a percentage of open interest, speculators have reduced their bearish JPY exposure in 12 out of 17 weeks in 2015, highlighting the significant shift in sentiment this year, which has sent non-commercial JPY positioning to the least bearish level under the period of 'Abenomics', i.e. since Q4 12. Consequently, although speculators remain absolute net short the JPY (see page 2), non-commercial positioning in the Japanese currency is now above the 50th percentile in a historical perspective.
The reduced appetite for JPY exposure reflects a more hawkish rhetoric from Bank of Japan (BoJ) recently, disappointing US data and that a large part of the portfolio reshuffle of Japanese institutional investors has already been done. While in our base case we do not expect more BoJ easing, it must still be remembered that the current pace of asset purchases is extremely aggressive and with a less bearish yen positioning this has increased the upside potential in USD/JPY when US data recovers and a Fed hike comes closer. We target USD/JPY at 121 in 1M and 125 in 3M (NYSE:MMM).
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