Bloomberg reports here today that recent data suggests that there is nearly YEN 100 trillion in leveraged FX trading originating from Japanese retail, presumably in one form of short YEN or another. OK so some of it is an extremely short-term speculative alternative to pachislo .
Nonetheless, if ever there was a reason for a large, counter-trend move, herds of Japanese retail finding themselves pari-passu in a hihgly leveraged trade would clearly be at or near the top of the list.
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Umm, I think dear Bloomberg (otherwise known as the Borg) has made a boo-boo here, or overstated the story as it is so prone to do. The 100 trillion yen figure refers to volume of transactions, which is indeed booming, but NOT outstanding positions. In fact the Q4 data released by this same organization in late-March (that was later found to be flawed to the upside) was that the net short-yen position was 1.3 trillion yen, or $11 billion. That's a big difference from 100 trillion. And that masks the fact that these margin traders tend to play ranges, and thus of late have been sellers into rallies of the dollar, euro, sterling, AUD or NZD against their much-beloathed yen. In fact, if you check out open interest -- a proxy of positioning -- on the Tokyo Financial Exchange right now, you'll find positions are relatively contained and waiting for a drop in all those currencies against the JPY.
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