Rates as of 0500 GMT

Market Recap

Not much movement in the currencies since Friday morning. The standout feature, such as it is, is the further decline in the yen. This seems to be driven by positioning as speculators go increasingly short the currency. The Commitment of Traders report shows that speculators have turned aggressively short JPY over the last two weeks.

Its not being driven by outflows from Japan; on the contrary, Japanese investors have been selling both foreign stocks and bonds.

My guess is that speculators are positioning for what looks likely to be a surge back into foreign bonds.

Japanese investors tend to be trend followers; that is, they prefer to sell into falling markets and buy into rising markets. Once global yields start to stabilize which they seem to be doing recently the increasingly high pickup in yield available in foreign bond markets even after hedging the currency risk may be attractive for Japanese investors. Perhaps speculators are frontrunning the start of the new Japanese fiscal year from April 1st, which often brings a surge of investment as new money pours into pension funds and life insurance companies.

However, the yen was recovering somewhat this morning on a riskoff mood after Nomura Holdings warned of a significant loss estimated at 2bn from transactions with a US client, which is rumored to be Archegos Capital Management. Archegos stunned markets on Friday with some massive block trades amounting to over 1bn each…