Bank of Japan governor Kazuo Ueda (Photo by RICHARD A. BROOKS/AFP via Getty Images)

Japan is fighting against the entire investing world in the currency market

5/9/24 10:50AM

Japan’s Ministry of Finance spent nearly $50 billion on April 29 and May 1 trying to prop up the value of the currency by selling US dollars and buying yen.

Who was on the other side of this trade?

Data from Deutsche Bank’s foreign exchange trading platform suggests: literally everyone.

“Nearly all client categories saw record USD/JPY buying during the assumed intervention days,” writes George Saravelos, global head of FX research at the German bank, in a note to clients on Thursday. “That absorption of USD/JPY selling from the Japanese Ministry of Finance was so broad-based continues to point to the lack of effectiveness of this policy.”

The Japanese yen is the weakest G10 currency in trading on Thursday, deepening its decline relative to the US dollar to nearly 10% so far this year.

Very low rates in Japan increase the appeal of holding other currencies where investors can earn more interest. Strategists have warned that action from the Bank of Japan may be needed to reinforce the Ministry of Finance’s attempts to guard against further yen weakness.

“Longer term, successful interventions tend to be (1) coordinated with other central banks and (2) unsterilized i.e. backed by shifts in relative monetary policy,” writes Dario Perkins, economist at TS Lombard, in a May 6 note. “Unilateral interventions often fail, especially when they run exactly counter to the broader thrust of monetary policy.”

At this point, perhaps the biggest risk to the anti-yen view is how popular that view is. Everyone and their mother was happy to sell yen versus the US dollar when the Ministry of Finance was buying recently. That's just part of an ongoing trend: speculators, in aggregate, have been short the yen for over three years. Bets in futures markets that the yen would decline are hovering near their highest level since 2007.

If the underpinnings of the short yen case start to fall apart, either by the Bank of Japan embarking on a more aggressive rate-hiking campaign or other central banks cutting rates by more than is currently priced in, then a lot of investors may be changing their minds — and positions — at the same time.

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Oil settles Friday at highest level since start of war

US oil prices moved higher in afternoon trading Friday, sapping strength from the stock market as they posted their highest close since the start of the Iran war.

After another day where the Strait of Hormuz was essentially closed to global tanker traffic, US futures for West Texas Intermediate settled up 3.1% at $98.71 a barrel for an 8.6% weekly gain, per Dow Jones data.

American officials have discussed using the US Navy to escort tankers through the narrow waterway between Iran and Oman, but have said plans for such convoys are not ready yet. However, it is unclear if military convoys would bring an end to the war-related dislocations in the oil market.

“It could help,” Tom Liles, senior vice president of upstream research at energy consulting firm Rystad, told Sherwood News in a recent interview. “It could also go in a lot of different directions if a Navy ship is hit or if a tanker is hit.”

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Stocks wiped out early gains to close lower amid the ongoing war in Iran.

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Memory stocks rebound off last weeks losses

Memory stocks Micron, Sandisk, Western Digital, and Seagate Technology Holdings rose again Friday, putting these crucial providers of chips for AI inference work on track for big weekly gains after last week’s steep losses following the outbreak of war with Iran.

There’s no obvious trigger for the move higher for these shares this week, other than a bit of a recovery in the AI trade more broadly — AI beneficiaries like IT cable and connections maker Amphenol and custom chip and networking company Marvell Technology clawed back some gains this week — perhaps due Oracle’s earnings earlier, and some mean reversion to boot.

Micron is due to report earnings after the close of trading on Wednesday, with the company catching a couple price target hikes this week, including one from Wedbush on Friday.

Sandisk is something of a different story, as its enormous gains over the last 12 months — roughly 1,200% — have made it a momentum play beloved by the retail crowd.

It was up about 20% this week at around 11 a.m. ET. And its nearly 170% gain this year keeps the stock on top of the S&P 500, in terms of price performance.

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The S&P 500’s internals are awful... while it’s still less than 5% from its record closing high

The breadth of negative momentum within the index’s constituents is even worse than at the tariff-induced market bottom in April 2025.