KUALA LUMPUR, June 5 (Bernama) -- Bursa Malaysia closed higher, with the benchmark index rising 0.60 per cent as bargain-hunting persisted following the recent sell-off, despite weaker performances across regional markets. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) gained 10.17 points to 1,693.43 from Thursday's close of 1,683.26. The benchmark index opened 3.19 points higher at 1,686.45 and traded between 1,684.36 and 1,698.53 during the trading session. However, broader market sentiment remained negative, with losers outnumbering gainers 666 to 477. A total of 574 counters were unchanged, 958 untraded and 12 suspended. Turnover fell to 3.41 billion units worth RM3.04 billion from 3.47 billion units worth RM3.58 billion on Thursday.
Hedge funds have made a significant retreat from their bearish positions on the yen, marking the largest shift since early 2011. Leveraged investors cut 56,639 net short positions on Japan’s currency over the two weeks leading up to July 23, according to data from the Commodity Futures Trading Commission.
Key Highlights:
Shift in Sentiment:
- Hedge funds have reduced their bearish bets on the yen, now at the least bearish since February.
- The pivot is driven by expectations that Japan's interest rates are poised to rise.
Impact of Carry Trade:
- The yen's recent strength coincided with a broad unwinding of the carry trade, where investors use low-yielding currencies like the yen to fund purchases in higher-yielding currencies such as the Mexican peso.
Market Expectations:
- Win Thin, global head of currency strategy at Brown Brothers Harriman & Co, notes that recent yen strength is driven by anticipation of a hawkish decision from the Bank of Japan (BOJ) this week.
- Should the BOJ disappoint with dovish commentary, the yen's recent rally may reverse quickly.
Upcoming Policy Decisions:
- The yen’s bullish sentiment will be tested with the upcoming policy decisions from the BOJ and the Federal Reserve (Fed).
- Swaps traders currently see about a 50% chance of a BOJ rate hike on Wednesday.
Recent Yen Performance:
- The yen has appreciated by about 5% following suspected market interventions by Japanese authorities to boost the currency earlier this month.
- On Monday, the yen was trading around 153.59 against the dollar.
Strategist Insights:
- Shoki Omori, chief desk strategist at Mizuho Securities Co, suggests that commodity trading advisers unwinding their positions have driven the recent moves. Post-BOJ and Fed decisions, these unwinds may cease and potentially reverse direction.
The coming week’s policy decisions from the BOJ and Fed will be crucial in determining whether the yen’s recent strength is sustained or if it faces a sharp reversal.
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