Sept. 16 (Bloomberg) -- The yen may strengthen next week as Japanese traders take a break for the “silver week” holidays, said Bank of Tokyo Mitsubishi UFJ Ltd., citing trading patterns.

Japan will have a five-day break in September for the first time since a 2000 law shifted national holidays that fall on Sundays to Mondays. The currency has gained in eight of the past ten Augusts, when many companies schedule vacation during the so-called Obon holidays. The yen reached a seven-month high of on Sept. 14 and traded as strong as 90.79 today.

“Historical trading patterns show this anomaly where the yen tends to rise while Japanese players are out of the market,” said Masashi Hashimoto, a senior analyst at the unit of Japan’s biggest publicly traded bank. “The yen may finally pierce through the 90 level next week.”

Local media have dubbed the five-day break -- starting Saturday, Sept. 19 -- Silver Week, comparing it to the Golden Week period in April and May when three national holidays are clustered. The September stretch of off-days is the result of the “Happy Monday” law of 2000, and any day sandwiched between two holidays becomes a day off as well.

Japan’s “Respect-for-the-Aged Day” is celebrated on Sept. 21, while Sept. 23 is the Autumnal Equinox holiday. The nation has 19 market holidays this year, compared with seven in the U.S.

Short Lived

The dollar may quickly recoup any losses against the yen during next week’s break, according to Takashi Kudo, director of foreign-exchange sales at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. in Tokyo.

“Goods from outside Japan just pile up in bonded warehouses while importers are on holidays, who then have to rush to buy dollars and pay bills once they come back,” Kudo said. Yen gains during extended holidays “turn out be unsustainable,” he said.

Traders who bet the dollar would fall during the Obon holiday last month “must have generated decent gains on that bet by now,” Norihiro Fukuyori, assistant manager of marketing at CyberAgent FX, a currency margin unit of CyberAgent Inc. “Given the growing imbalance of positions, it’s wise bet to start building long positions on the dollar, especially near the 90 yen mark.” A short is a bet that an asset price will fall.

Futures traders increased wagers to the highest level in almost seven months that the yen will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission showed.

The difference in the number of bets by hedge funds and other large speculators on an advance in the yen compared with those on a drop -- so-called net longs -- was 40,799 on Sept. 8, the biggest since the week ended Feb. 16, compared with net longs of 32,365 a week earlier.

Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of Tuesday.

To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Hiroko Komiya in Tokyo at Hkomiya1@bloomberg.net.

Last Updated: September 16, 2009 00:48 EDT