KUALA LUMPUR, Oct 20 (Bernama) -- Bursa Malaysia’s benchmark index edged higher at the close as bargain hunting emerged following Monday’s sharp sell-off, although it narrowly failed to reclaim the 1,600 level, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) gained 3.83 points, or 0.24 per cent, to 1,599.58 from Monday’s close of 1,595.75. The index opened 3.18 points lower at 1,592.57, marking its intraday low, and reached an intraday high of 1,602.83 in early trading. On the broader market, decliners outnumbered gainers 751 to 331, while 499 counters were unchanged, 1,259 untraded and 10 suspended. Turnover rose to 2.86 billion units worth RM2.42 billion against Monday’s 2.49 billion units worth RM2.38 billion.
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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