This Bank Nailed Yen’s Decline, and It’s Not Chasing the Move

Prefers Exposure to Japan Over China: Stubbs

The yen’s sudden slump over the past week caught many investors by surprise, but not Commerzbank AG.

The bank said on May 20 investors should sell the Japanese currency with a target at 124 against the dollar. The yen went on to drop 2.9 percent in the next eight days, reaching 124.46 on Thursday. While the currency may weaken further as Bank of Japan officials decide whether to increase stimulus to boost the country’s ailing economy, the German bank is cashing in its bet.

“Part of the move was technical, part of it was dollar strength -- there’s a possibility the BOJ may do something in the coming weeks and months,” said Peter Kinsella, a senior currency strategist at Commerzbank AG in London. “The short-yen trade could well work in the coming weeks and months, but I think it’s always prudent to take profit when you have big moves like this. These things never go in a straight line.”

The yen has depreciated as the dollar surged since Federal Reserve Chair Janet Yellen said last week she expects to raise interest rates this year, and after a report showed core U.S. inflation rose faster than economists predicted. The yen was one of the most resilient currencies against the dollar earlier this year, and had been trading in a range of just two yen around 120 per dollar this quarter before the recent move.

Japan’s currency is down more than 30 percent since Prime Minister Shinzo Abe came to power in 2012.

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