Halister News

(Bloomberg) -- USD/JPY investors may be wary of getting caught off guard again by any year-end twist to BOJ policy given rising Japanese yields, Bloomberg strategist David Finnerty writes.

• Yen particularly vulnerable to any spike higher given leveraged funds have a growing short position. CFTC data shows net shorts of 49,904 contracts in week ended Dec. 13, most this year
• BOJ’s current policy is made up of combination of policy- rate balance at -0.1%, 10-yr JGB yield target around 0%, monetary expansion with central bank buying JGBs at annual pace of ~JPY80t
• 10-yr yields have been caught up in rising yield curve tide in past month, climbing to 0.1% on Dec. 16, highest since Jan. 29
• BOJ last week increased amount of longer-maturity bonds it purchased, which may have been an attempt to control steepening in that part of yield curve
• Question for investors is whether BOJ will keep its 0% bond- yield target, which should be supportive of a stronger dollar; or will it adopt less accommodative policy and let yield float higher which may see yen rally
• NOTE: David Finnerty is an FX strategist who writes for Bloomberg. The observations he makes are his own are not intended as investment advice.