Over the past week, Japanese travel agents have reported a rise in inquiries about flights to Hawaii for the Honolulu Marathon — a paradisiacal 26-mile slog held in late December, and, in deeply uncertain times, probably as good as any other indicator for the next move in the yen.
Back in mid-August, analysts could plausibly argue that, after a precipitous run down since March, the yen’s weakness against the dollar had likely hit its limit. The 24-year low of ¥139 to the dollar reached so spectacularly in mid-July, they suspected, had proved a robust level of resistance; the new balance of probability now pointed to a phase of yen strength into the calendar year-end, with several forecasting a rise to about ¥130/$.
The thesis was based on the idea that the factors that had been driving the yen’s descent — primarily the widening policy divergence between the rate-raising US Federal Reserve and the resolutely ultra-loose Bank of Japan — had subtly changed over the summer. By mid-August, and with the short-yen trade apparently less popular with speculators, Nomura analysts could list several such changes to the market environment.