Japanese retail investors — who dominate spot trading in Tokyo’s foreign-exchange market — have increased bets on volatile currencies despite the rising risk of a monetary policy shift at home this year.
Net long positions of individual account holders in four currencies favored by these investors, including the Mexican peso and the South African rand, have increased to ¥147 billion ($1 billion), a Bloomberg analysis of July figures from Tokyo Financial Exchange shows. That’s the highest in more than two years.
While the amount is modest relative to daily global foreign-exchange turnover of $7.5 trillion, it indicates that the prospect of higher interest rates in Japan won’t deter popular carry trades made from Tokyo. These involve selling the low-yielding yen to buy high-yielding currencies and often trigger sharp moves in forex markets when they go wrong and have to be quickly unwound.
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