USD/JPY investors may be wary of getting caught off guard again by any year-end twist to BOJ policy given rising Japanese yields.
Yen particularly vulnerable to any spike higher given leveraged funds have a growing short position. CFTC data shows net shorts of 49,904 contracts in week ended Dec. 13, most this year
BOJ’s current policy is made up of combination of policy-rate balance at -0.1%, 10-yr JGB yield target around 0%, monetary expansion with central bank buying JGBs at annual pace of ~JPY80t
10-yr yields have been caught up in rising yield curve tide in past month, climbing to 0.1% on Dec. 16, highest since Jan. 29.
Question for investors is whether BOJ will keep its 0% bond-yield target, which should be supportive of a stronger dollar; or will it adopt less accommodative policy and let yield float higher which may see yen rally.
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