JAPANESE MARGIN TRADERS ON THE WRONG SIDE OF THE YEN TREND

I you look at recent data from the Tokyo Financial Exchange http://www.tfx.co.jp/en/mkinfo/sikyo_forex_e.shtml

$YEN and £YEN shorts climbed to all-time highs. Click 365 shows $YEN shorts now at 51,008 contract, £YN short at 19,057. They flipped to USD short since 5Feb, and continue to add to short $YN. £YEN since 16Jan. $YN was at 90 handle, £YEN was at 133.63 (down to 122 handle after that) back then. Considering Click 365 has abt 1/10 of mkt share, Japnese margin traders have about $5bn of $YEN short, £2bn of £YN shorts. On a NET basis they have 17,169 in USDJPY and 5,362 in GBPJPY equating to around USD1.7bn and GBP550mill, respectively. That is a chunky short position in this thin market environment.

Can you say SQUEEZE?

Their positions have caught media attention also:

TOKYO (Nikkei)--Retail investors are bucking the yen's decline in the foreign exchange market by shorting the dollar, with such positions accounting for a record 60%-plus of yen-dollar margin trading. Considering that short dollar positions are taken to pocket profits when the yen strengthens, these transactions reflect retail traders' skepticism that the Japanese currency will continue to depreciate. According to the Tokyo Financial Exchange, short dollar positions accounted for more than 60% of all yen-dollar margin transactions for the first time on Feb. 18, up from 50% at the end of last year. With the yen weakening about 10 yen against the greenback in just one month -- it was hovering in the upper-80s in early February -- individuals appear to be betting that the Japanese currency will soon regain ground. Retail investors are selling other currencies on margin as well. The percentages of short euro and pound positions have risen to roughly 60% and about 70%, respectively. "The investment style of retail investors is changing," says an official at FX Zero Inc. Until last March, most individual investors sought to secure a yield spread between Japan and other countries by boosting long positions on foreign currencies. But yield spreads have since narrowed in the wake of interest rate cuts around the globe, while the market has grown more volatile. This is leading a growing number of individuals to engage in transactions based on their market predictions, even at the cost of some negative spreads.