Insight: Easy money has been made in yen

Intervention by the G7 and Bank of Japan to stabilise the yen following the Japanese earthquake means the easy money had now been made trading the yen, says Insight's Dale Thomas.

The group's head of currency suggests investors look instead to Japanese equities for the greatest upside potential as the yen begins to normalise.

"The yen has come a long way back now from the lows and the Nikkei is still a long way lower, so if you want to play Japan recovering and the yen tensions declining it might be better to look at the equity market. Most of the sell-off in the yen we are going to see has happened."

The currency was heavily impacted by the huge earthquake and tsunami that decimated the city of Sendai and sent markets into freefall. The yen saw a record rise and a subsequent fall against the dollar as the Bank of Japan and the G7 intervened to rein in the currency.

After reaching a record high of 76.25 on Thursday, the yen then suffered its largest one-day fall, moving down 2.7% to 81.05 the following day as the G7 and Japanese authorities reached an agreement on how to stabilise the currency.

Investec's head of currency Thanos Papasavvas says investors looking to make short-term tactical bets on the yen face uncertainty over its eventual level post-intervention.

"I would not recommend investors trade the yen on a shorter-term basis because it is essentially just punting - it may go to 83, it may go to 78 against the dollar, you do not know what the tactics of the central banks are," he says.

He has been underweight the yen for some time, favouring a pro-growth long-term stance on his portfolios.

"What has happened is terrible, but in terms of economics it will not have a medium-term impact on Japan or on global growth. It may impact sentiment in the shorter term, and domestic demand, but we can see through that as the markets are starting to normalise.

"This intervention is not changing the overall trajectory so we have kept our pro-growth portfolio." Papasavvas is underweight both yen and US dollar, overweight the euro and Asian currencies, and slightly underweight the commodity currencies.

Thomas says he also had very little in the yen in the week prior to the earthquake. "We expected it to trade in the 80 to 83 range against the dollar as US interest rates are flat lining and there is a strong correlation between the two," he says.

"We were marginally overweight coming into this crisis, but we changed that and when we had the collapse on Thursday night this was clearly an environment in which there was going to be intervention, thinking back to Kobe in 1995, so we built up some reasonable sized yen short positions and after the intervention we have taken profits on them."

Meanwhile Armstrong Investment Management's Ana Cukic Armstrong has taken a different approach, buying a position in the Korean won versus the yen last week, believing as Japan may monetise its debts, the dollar and yen look unattractive.

Artemis' William Littlewood, a long-term bear on Japan with aggressive shorts on the yen in his £840m Strategic Assets fund, declined to comment.