Geoffrey Fouvry
Founder & CEO of GraphCall/GraphFinancials, Financial Data Analysis
Shorting the yen against the dollar makes little sense given Japan's stronger fiscal and external position. Japan's primary deficit is a fraction of the US's, it is cutting energy imports through renewables, holds massive external assets and shows budget wariness, such as refusing Asian Games spending. Meanwhile Trump promises $5,000 per voter for the midterms. Shorting the yen against commodities such as silver is understandable; against the dollar, not. x.com x.com x.comÂ
Being short the yen against the dollar makes little sense, because the dollar's devaluation is still to come while Japan's devaluation is mostly in the rear-view mirror. Ray Dalio, quoted by @GoldTelegraph, says the only way to resolve the debt problem is printing money and devaluing the currency. x.comÂ
The bid for US Treasuries is thinning beyond Japan, leaving the US needing new buyers to fund its borrowing. Net purchases by the most US-aligned countries are down more than 60% to their lowest since 2021; South Korea sold a record $23.8 billion, the most since 1977. x.comÂ
Japan's intervention may mark a turn higher for the yen, but a surge like past appreciation periods is unlikely because there is no yen carry trade to unwind these days. Japan's near 5% of GDP current account surplus is also less structural than it looks: trade is near neutral, and the surplus comes from large investment income that is usually reinvested abroad automatically. x.com x.comÂ
The US needs a weaker yen, so Treasury Secretary Bessent's visible note to "Buy Japanese Yen (JPY) $5-10 bil," chickenfeed in any case, looks like a psyop and misdirect, calling for the opposite positioning; the buying was a chunk of carry trade to close. Per @TreasuryBonds1, Japan reportedly spent about $53 billion buying yen in a single day, its largest intervention ever, and Bessent called the yen very undervalued. x.com x.comÂ
The yen looks set to keep strengthening against the dollar, because Treasury Secretary Scott Bessent appears determined to push USD/JPY lower. Bessent said in an interview that as "the house" he knows exactly what Japan, the Bank of Japan and its policymakers will do when the US intervenes in the yen, and dared markets to bet against him. As a former fund manager who helped successfully attack the pound and the Thai baht, he holds a real information advantage. x.comÂ
Going long the Japanese yen is the best trade on earth right now, because US Treasury Secretary Scott Bessent will step in to save it, with swap lines and similar measures. The yen's slide has become severe enough that Japan needs to raise rates. x.com x.comÂ
The yen stays weak because intervention cannot fix Japan's deeply negative real rates and a sluggish central bank. Japan deployed up to $95.6 billion over two days, and joint intervention with the US Treasury briefly lifted the yen about 2.8%, but about 85% of that rally has evaporated, with USD/JPY back near 159. The yen has lost 30.6% against the dollar in five years. Intervention did warn speculators off the 160-164 zone, and yen net shorts fell $8.865 billion in a week, the most since 2014. … Show more
The yen looks set to strengthen sharply, with USD/JPY heading to 130. The call comes as hedge funds turned the most negative on the yen since 2007, per CFTC data cited by @financialjuice. x.comÂ
The US dollar appears to have finally cracked, which would be good for the euro and the yen, along with gold, bitcoin, silver, copper and bonds. x.comÂ
The yen keeps weakening despite repeated intervention, with dollar-yen back at 156. The US has no choice but to fund as many rescues of the yen as the BoJ wants, since otherwise Japan would be forced to sell its US Treasuries. The BoJ meets on the 18th, and it is unclear what it can even say. x.com x.comÂ
The yen is strengthening on a carry-trade unwind as markets price in a 50-basis-point BOJ hike. @VKMacro notes USD/JPY fell below 157 and held, something intervention could not achieve. Kevin Warsh's speech was an art-of-the-deal sleight of hand that fooled markets into seeing a hawkish Fed. Yen calls are working because volatility was too low for the coiled spring of carry leverage. x.com x.comÂ
