Hedge funds are the latest names being thrown around as the dollar rout pushes USD/JPY to a 116.70 low. Selling has come from a variety of sources today, with CTAs, model funds and speculative account cited in the European morning. The US session has seen a number of prime names, with a couple of reasonable sized funds pushing through good amounts.
A large Swiss name was also among the sellers reportedly filling in a very good Asian bid at 116.80. It is difficult to point towards a concrete reason why the pullback has been so pronounced. Yesterday's downward revision in US growth forecasts have been cited, along with late Asian talk that the MOF was encouraging exporters to buy JPY. The Japanese government's downward revision in the November economic assessment had a muted impact, while we doubt the efficacy of the MOF talk.
Historically, the Thanksgiving holiday has been the time for some hedge funds/leverage accounts to trim up exposure before volumes thin into the year-end. Notably, USD/JPY fell from 119.56-117.82 on Thanksgiving week last year. It then posted a rally up to 121.39 into the second week of December before slumping to 115.29 in the week preceding Christmas as hedge funds exited carry trades.
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