The yen is on course to become the best G-10 currency this quarter, even with today's decline following the China-North Korea meeting,
The Japanese currency's gains in 1Q were probably helped by exporters hedging and repatriating cash before the end of fiscal year, but it's bound to recede once April 1 rolls around. That's when Japanese institutional investors tend to start new investment, which should mean flows into higher-yielding assets outside of the country.
The outflows may also be exacerbated by retail investors. They seem to be taking on risk based on continued positioning in TRY/JPY and a recovery in ZAR/JPY bets, as well as according seven consecutive weeks of equity purchases, according to Bank of America data. Positioning is also less favorable for JPY, with CFTC data showing JPY net shorts slumped in the past week to the least since November 2016, making a short squeeze less likely.
Source: Bloomberg Pro Terminal
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