Thu, Jan 29, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Hedge funds betting on long positions in yen hit by Tokyo’s intervention to stop its rise

Thursday, September 16, 2010
Opalesque Industry Update – A group of hedge funds betting “long” on the Japanese currency, took a hit Wednesday after Tokyo intervened to stop the surge of the yen, the Wall Street Journal reported.

The yen dropped 3% late Wednesday in New York, trading to 85.59 yen from Tuesday’s closing of 83.10 after the Japanese government intervened to keep the yen lower against the U.S. dollar. The decision spooked investors, who dumped their yen holdings.

John Taylor of FX Concepts one of the world’s largest currency-focused hedge funds based in New York with $7.8bn in AuM, told Bloomberg the firm “lost a whole bunch of money.” FX Concepts was estimated to have lost 2% on Wednesday but remains up 12% this year from gains made in previous surges of the yen.

Other funds which lost money betting on the yen were London firms Aspect Capital Ltd. and Winton Capital Management. However, Winton's $5bn Winton Futures Fund is still up 8% this year, the Journal said.

Kathy Lien, director of currency research at Global Forex Trading, cited data from the Commodity Futures Trading Commission which showed that hedge funds held a near-record level of 52,000 contracts of “long” positions on the yen as of Sept. 7, 2010.

A report by FTAlphaville showed that the Bank of Japan (BoJ) sold between $11bn and $12bn worth of yen into the market on Wednesday to buy dollars and arrest the rise of the Japanese currency.

It added that the BoJ has another $117bn in its war chest as back up in case the amount it dumped into the market was not sufficient. Figures from Japan’s Ministry of Finance revealed that it dumped at least $171bn in over 47 days in 2004 in its last major intervention into the currency.

A different report from Reuters indicated that the BoJ may have spent more than $20bn in Wednesday’s intervention to weaken yen against the U.S. greenbuck.

Despite efforts of the BoJ, many financial analysts believe Japan will not be able to stop the rise of the yen. Dan Cook, a senior market analyst at Chicago-based IG Markets said, "It probably takes a lot more money than any central bank is willing to print to defy the larger economic forces at work.”

Adding pressure to the yen is the anticipated decision the U.S. Federal Reserve to pump more money into the local economy to sustain the economic recovery.

However, Reuters added that there were also winners in Wednesday’s intervention, including Japanese exporters and some hedge funds. David Kupersmith, head trader at global macro hedge fund based in Greenwich, Connecticut Third Wave Global disclosed that their company recently positioned the fund's discretionary portfolio “short” for the yen on the belief an intervention by Japan’s central bank is forthcoming.

"We had no opinion on timing but the election made it more likely with the resolution of the political situation in the short term," he said.

Since Tuesday, the BoJ has been intervening to curb the rise of the currency. Most Asian stocks rallied on Tuesday as the Nikkei 225 jumped to a one-month high after Tokyo intervened to weaken the yen.

On Monday, Prime Minister Naoto Kan beat Ichiro Ozawa for control of the ruling party which sent the yet to rise to a 15-year high.
- Komfie Manalo

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - U.S. investors favor currency hedged Europe ETFs as euro tumbles, Quants win back investors as Swiss franc fuels volatility gains, David Einhorn's $7bn hedge fund is loading up on this stock, Hedge fund BlueMountain Capital unveils Ocwen Financial short, claims default on notes[more]

    U.S. investors favor currency hedged Europe ETFs as euro tumbles From Reuters.com: U.S. investors stung by the falling euro who want to stay invested in Europe are turning to exchange-traded funds designed to strip out the impact of the region's currency. The biggest among so-called "cur

  2. News Briefs - Millennials use tech tools to jump into investing, Winklevoss twins to launch bitcoin exchange with FDIC insured deposits, Robertson’s legacy from hedge funds to New Zealand, Real estate managers exploring smaller open-end funds[more]

    Millennials use tech tools to jump into investing It is the Facebookification of monetary investing. From social networking platforms that enable young investors to stick to every other's stock-picking mojo, to internet sites for initially-timers hungry for a piece of the Silicon Valley

  3. Update: Prosecutors seek 12 years for hedge fund manager Francisco Illarramendi[more]

    Komfie Manalo, Opalesque Asia: Federal prosecutors have asked the court to sentence convicted hedge fund manager Francisco Illarramendi to 12 years imprisonment for running an elaborate Ponzi scheme that bilked investors hundreds of millions in dollars, including a Venezuelan pension fund, report

  4. Institutions - Ontario pension fund leader calls all asset classes ‘expensive’, Taiwan's BLF plans $2bn in alternative mandates[more]

    Ontario pension fund leader calls all asset classes ‘expensive’ From WSJ.com: The head of one of the world’s largest pension funds said that across asset classes, “everything is expensive.” Ron Mock, who leads Canada’s $141 billion Ontario Teachers’ Pension Plan, said that the plan would

  5. Opalesque Exclusive: Ex-Citi trader launches 'sleep-at-night’ long/short equity fund[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: After working at Citi's proprietary trading desk, managing a large portfolio between 2008 and 2011, Joel S. Salomon founded SalauMor Management in New York