Demand for JPY is rising
Japan is getting ready for Obon* holidays. Businesses in Japan shut down for a couple of weeks around the middle of August.
Mizuho: “There are some expectations that investors will redeem, repatriate or convert earnings, whether they are dividends or coupons back into JPY before the Obon holidays.”
As a result, demand for JPY from Japanese investors is expected to rise ahead of big capital inflows from interest payments on the country’s large US Treasury holdings.
“It is the fear of the flow rather than the actual flow that is causing yen strength. What it is doing is that it is causing investors around the world to cut long USD/JPY positions,” adds the bank.
*Obon or just Bon is a Japanese Buddhist custom to honor the spirits of one’s ancestors.