AUD/JPY-Lack of Japanese Carry-Trade Interest Weighs

From the FXWW Chatroom: Tokyo sources indicate that Japanese retail investors (or the “Mrs Watanabes”) are not showing interest in the JPYfunded carry trade as a source of yield income. Day traders now dominate the Japanese retail space and move nimbly and opportunistically in and out of currency exposures. Meanwhile, Japanese institutional traders continue to buy foreign bonds/other assets at a healthy rate but have been more inclined to hedge the currency exposure associated with these purchases. Judging by recent trading patterns, Japanese investors have been net sellers of AUD/JPY despite risk assets bouncing or at least stabilizing over the past two weeks. AUD/JPY is starting to trend lower again after bouncing from a 3 1/2-year low below 78.00 on February 11 to 82.40 on February 16. If market volatility returns after a brief lull, AUD/JPY could fall sharply and easily test/break support around 78.00.

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