InvestIdeas

The COT has fallen alongside the yen in recent months. It just hit its most negative reading since mid-2007. And as it turns out, that was also a darn good time to bet on a yen reversal…

Most folks don’t expect a turnaround from this currency right now. But the contrarian bet is that we should see a much stronger yen in the months ahead.

The yen is expected to remain under pressure given the yawning gap between interest rates in Japan and the US.

While the BOJ has finally joined the Federal Reserve in tightening monetary policy, Japan’s short-term rate is still just 0.1% compared with the Fed’s 5.5%.

Until there are clearer signs of when US rates will start coming down or of the BOJ pushing more aggressively to raise borrowing costs or cut back its bond purchases, there is little prospect of the tide turning.