Citigroup's Yen Trade Decision#
Citigroup strategists have recently recommended that clients close their long positions on the Japanese yen against the US dollar. This decision comes in light of Japan's recent intervention in the currency market and concerns regarding rising oil prices, which could negatively impact the yen.
Background on the Trade#
The strategists, led by Dirk Willer and Adam Pickett, initially entered this trade on April 1, when the yen was valued at approximately 158 yen per dollar. Their strategy was based on expectations that Japan might intervene in the currency market and that oil prices would ease as tensions in the Middle East decreased.
Closing the Position#
The position was closed on Thursday after Japan's intervention caused the yen to drop below 157 yen per dollar. This trade resulted in a profit of about 0.17%, as noted by the strategists. They expressed concerns that sustained high oil prices could lead to increased inflation fears, which might further pressure the yen.
Adjustments to the Portfolio#
In addition to closing the yen position, Citigroup's team has also reduced their exposure to Japanese bonds within their model portfolio. They cited ongoing fiscal risks as a reason for this adjustment, indicating a cautious approach to the Japanese financial landscape.