I am back from vacation and found this interesting tidbit that could lead to further yen strength over the next few days. Sumitomo has announced they are looking at doing a rights issue next week (up to USD 8.6 bio equiv) of which 50% will be offered to non-domestics. This deal is expected to close on June 16 and allocations likely to be given on the June 17 settlement T+3.

There could be a lot of interest in this as:

1) Real money managers continue to invest generally for low levels
2) Global equity managers are very underweight Japan
3) There is general appetite for financials.

Given real money equity managers do not currency hedge, this has the potential to create heavy buying of yen this week, particularly against the non-dollar currencies. Look out below EUR/JPY.

 

Kathy Lien is Director of Currency Research at GFT, and runs KathyLien.com.