JPMorgan Econ FI-FX Outlook Yen-maggedon-109456595

1ArindamSandilyaAC(65)6882-7759arindam.x.sandilya@jpmorgan.comJPMorganChaseBank,N.A.,SingaporeBranchTiffanyWang(852)2800-1726tiffany.r.wang@jpmorgan.comJ.P.MorganSecurities(AsiaPacific)Limited/J.P.MorganBroking(HongKong)LimitedBenKJarman(61-2)9003-7982ben.k.jarman@jpmorgan.comJ.P.MorganSecuritiesAustraliaLimitedPatrickRLocke(1-212)834-4254patrick.r.locke@jpmchase.comJ.P.MorganSecuritiesLLCGlobalFXStrategy27July2024JPMORGANtionsofdisinflationaryFedeasing.Howeversimultaneousimplosionsintechstocks,industrialmetalsandcommodity/EMFXalongsideJPYstrengththistimearoundarerevivingdarkmemoriesof2001/’07whentheYenhadwieldedafear-somereputationasasafehavenbeneficiaryofcarrytradecrashes.PlentyhaschangedsincetheninJapan’scurrentaccount(tradedeficit)andinflation(deeplynegativerealrates)backdroptoblunttheYen’scrisishedgecharacteristics,butmacro-fundamentalstendtotakeabackseatwhendeleveragingfevergripscrowdedpositions.Figure1:ThepasttwoweekshavewitnessedahistoricYenrallySource:J.P.Morgan,PredictIt,BloombergFinancialL.P.HistorysuggeststhatacuteYenstrengthtendstopeterout,thougholdlowsarenoteasilyrevisited.ThegoodnewsforstructuralYenbears,orthoseunfortunatelycaughtupinthiscarryunwindmaelstrom,isthatintenseYenstrengthofthekindseenoverthepasttwoweekstendsnottosustain.Figure2AcuteYenstrengthofthismagnitudetendstopeteroutfairlyqu...