ADVERTISEMENT

International

Japan Retail Traders Slash Bullish Bets on Mexican Peso

(Tokyo Financial Exchange)

(Bloomberg) -- Japanese individual investors cut bullish bets on the Mexico peso against the yen to the lowest this year, in a sign of how interest-rate hikes at home may reduce their appetite for higher-yielding assets abroad.

The portion of long positions held by Japanese foreign exchange margin investors in the peso against the yen dropped to 87% on July 31, when the Bank of Japan hiked rates. That matches the least this year, according to data on the Tokyo Financial Exchange’s Click 365 platform. It was as high as 94.5% in early June.

The Mexican currency has dropped for nine straight sessions, the longest falling streak since 2021 and plunging 10% during that period, Bloomberg-compiled data show. The BOJ’s move to raise rates for the second time this year, and signals it may increase rates further have caused a rapid unwind in carry trades. That’s a strategy that uses low yielding currencies like the yen to fund purchases in higher yielders such as the Mexican peso.   

The peso-yen “is in freefall, and rallies will likely be short-lived, as carry trades continue to be taken out to the woodshed,” said Chris Weston, head of research at Pepperstone Group Ltd.

©2024 Bloomberg L.P.