BNP Paribas FX Positioning Analysis indicates that net JPY positioning has moved into positive territory in recent weeks, reaching its highest score since Jan 2012 of +19 (out of a scale of +/-50).
"This move in positioning appears at odds with JPY price action, with USDJPY rising 2.6% since 9 July. We view that the rise of USDJPY despite an increase of net JPY positioning can be explained by two key factors," BNPP clarifies.
"First, the rise of US yields can account for the move in USDJPY according to BNP Paribas STEER, our shortterm fair-value model," BNPP argues.
"Second, the pick-up of Japanese portfolio outflows has likely contributed to the weaker JPY. Hence, the JPY buying from FX investors appears to have been offset by domestic Japanese flows," BNPP adds.
"Looking forward, a rise of US yields and a recovery of bearish JPY positioning are likely to further support USDJPY in line with our Q3 and Q4 forecasts of 127 and 130 respectively," BNPP projects.