Marble Capital reports that on September 4, as the yen strengthened and approached the 155 level, JPMorgan warned that if USD/JPY falls below 155, approximately JPY 16–17 trillion (around USD 102.6 billion) in outstanding yen short positions could trigger a concentrated unwind, further pushing the yen higher and potentially driving USD/JPY down to the 142–146 range. JPMorgan strategists, including Junya Tase, noted that recent price action suggests large-scale yen shorts may not yet be fully unwound. Should USD/JPY break below 155, the risk of a “sell-begets-sell” dynamic would rise, potentially leading to a yen appreciation exceeding market expectations. This week, USD/JPY briefly touched 160.39 before rapidly retracing to around 155.30. The yen is on track to appreciate about 2.7% against the dollar this week, marking its best performance since July. The yen’s strength has been driven by multiple factors, including rising market expectations for further Bank of Japan (BOJ) rate hikes, unwinding of speculative short positions, and increased demand for currency hedging by domestic Japanese investors. The swap market currently fully prices in a 25-basis-point BOJ rate hike this month and assigns an approximately 80% probability of another hike in December. However, JPMorgan believes market expectations regarding BOJ and GPIF portfolio adjustments may be overdone and does not consider a sharp break below the 155–165 range for USD/JPY to be likely. Meanwhile, Japan’s top currency official, Junichi Muraoka, expressed dissatisfaction with the current yen movement and stated that Japan is prepared to continue intervening to manage forex volatility, further heightening market concerns about official intervention. On the dollar side, Bank of America currently favors shorting USD/JPY with a target of 149; TD Securities maintains a mildly bearish view on the dollar for the remainder of the year. Markets are now awaiting U.S. non-farm payrolls data and next week’s CPI release to gauge the Federal Reserve’s future policy path.
Morgan Stanley warns that 155 could trigger yen short liquidation, with USD/JPY potentially falling to 142–146.
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Summary
Morgan Stanley warns that a USD/JPY drop below 155 could trigger yen short liquidations, with key altcoins to watch amid shifting market sentiment. A decline may unwind $102.6 billion in yen shorts, pushing the pair to 142–146. Analysts note mixed positioning signals from the Fear & Greed Index, with the yen rising on expectations of BOJ rate hikes and increased hedging demand. Japan’s forex chief signaled potential intervention if necessary. Morgan Stanley doubts a break below 155–165, citing an overestimation of BOJ policy shifts.
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