Traders expect yen to weaken versus dollar as Japan’s elections approach — Bloomberg

Options traders are adjusting their yen forecasts in anticipation of its decline against the dollar, driven by political instability in Japan, global trade tensions, and potential shifts in US Federal Reserve policy, Bloomberg reports.

According to Chicago Mercantile Exchange Group’s data, dollar-yen buy orders more than doubled those favoring the Asian currency on July 11. As Graham Smallshaw of Nomura Singapore Ltd. noted, investors are now hedging risks tied to Japan's elections and ongoing trade negotiations between Tokyo and Washington.

The expert said some traders are targeting a dollar-yen rally up to its 200-day moving average at 149.71. The pair closed last week at 147.43.

According to Citigroup's Akira Hoshino, investment funds are aggressively building long dollar positions ahead of Japan's elections, betting on yen weakness. The latest US jobs data has further fueled this trend. The stronger-than-expected figures have reduced expectations for near-term Fed easing, making the dollar even more attractive for carry trades.