In spite of Friday's quick rally in yen, the sentiment has turned against the currency. As discussed before, the currency is now less likely to be used as a "safe haven". Some of course continue to argue that nothing has changed with respect to yen's status, but the data says otherwise.
WSJ: - Speculative investors have turned against the yen for the first time since late May, U.S. government data showed Friday.Japan's fundamentals continue to look weak. With China boycotting Japanese goods, Japan's trade deficit continues to widen.
Investors held a net short yen position--or positions that would benefit if the yen fell against the dollar--totaling $2.8 billion as of Oct. 23, according to the Commodity Futures Trading Commission's weekly report on the commitments of traders. It was the first time since May 29 that the majority of bets in the futures market favored a decline in the yen.
Goldman's JPY positioning index is flashing red as well - in spite of the increased uncertainty in the various risk asset classes (for example both copper and the yen declined this month).
Goldman: - The biggest mover in this week's COT report was JPY, where net positioning fell by -$4.4 bn from last week and now stands at -$2.8 bn ahead of next week's BoJ meeting and its biannual Outlook report publication. Speculative long positioning in the currency against USD fell by $2.8 bn, while traders increased their short positions by $1.7 bn. The combination of both led our JPY Sentiment Index score to drop by 22.2 points to 38.8, down from last report's reading of 61. This change in JPY net positioning accounts for potentially all of the increase in overall USD net positioning, up by $4.3 bn on the week, as changes in net positioning in the other seven currencies included in the report broadly canceled each other out.Part of the fundamental shift is the market's expectation that the BOJ will shortly resume yen "printing" that will overshadow (on a relative basis) what the Fed is doing. And that will cap yen's appreciation even in the face of risk assets selling off.