Japan’s army of retail forex traders just made the biggest collective bet against the US dollar in nearly two decades. Net short positions against the greenback reached ¥2.79 trillion, roughly $17.2 billion, marking the highest level since late 2008.
To put that in perspective, this figure represents a more than fourfold increase from the previous month.
The Mrs. Watanabe effect
If you’re unfamiliar with “Mrs. Watanabe,” here’s the quick version. The nickname refers to Japan’s retail forex traders, typically small individual investors who collectively wield outsized influence in currency markets. They control a significant portion of Tokyo’s spot foreign exchange trading volume.
For years, Mrs. Watanabe was synonymous with the yen carry trade. The playbook was simple: borrow yen at Japan’s rock-bottom interest rates, convert it to dollars or other higher-yielding currencies, and pocket the difference.
