Investors reversed short yen carry trades with bullish yen options positions ahead of the volatility that hit global markets on August 5.
Dealers say clients had been scrambling to exit speculative short yen positions over the past two weeks following the sharp appreciation of the Japanese currency in the lead-up to the Bank of Japan’s rate hike on July 31 and the US Federal Open Markets Committee meeting on August 1.
According to options traders, a lot of the buying had come from real money firms such as asset managers and corporates, as well as commodity trading advisers and hedge funds buying long positions to hedge exposures to onshore Japanese equities, which suffer from a stronger yen.
“I would say the institutional client base has actually net made money on this USD/JPY move lower,” says the head of FX options trading at…
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