The Turkish lira’s tumble last week flushed out a number of bullish traders. Some Japan’s retail investors are already starting to jump back in.
Individuals in the Asian nation boosted net long positions in the currency by 2,302 contracts on Friday after trimming their holdings by 28,108 in the week through Thursday, according to Tokyo Financial Exchange Inc. data compiled by Bloomberg. Separate data from Gaitame.com Co. showed 94% of lira-yen positions held by clients with the Tokyo-based companies were longs as of Monday.
Japanese individual investors are returning to the lira even as some strategists warn of more losses after it posted the steepest five-day drop in more than two years last week. The currency was pummeled by concerns about the central bank’s independence and worries may persist even after new governor Sahap Kavcioglu sought to reassure markets.
There is “steady dip-buying demand from investors as Turkey’s interest rates are still very high relative to other countries,” said Toshiya Yamauchi, chief manager for foreign-exchange margin trading at Ueda Harlow Ltd. in Tokyo. “The central bank may cut rates but not drastically, which will probably continue to draw interest from Japanese investors to take positions in the lira.”
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The lira slid 1.4% to 13.1951 yen as of 5:12 p.m. Tokyo time on Tuesday. Three-month yields implied in the Turkish lira forwards stood at 29.7%, compared with negative 0.17% for the yen.
Tokyo Financial Exchange data also showed Japan’s retail investors are betting against the dollar.
Net shorts on the dollar-yen pair rose to 139,470 contracts on Friday, the most since June. The U.S. currency climbed beyond 110 yen on Tuesday for the first time in a year.
– Bloomberg