I mentioned this last week and of course I might not be seeing the whole picture. An excellent source told me that Goldman’s were very heavy sellers of USD/JPY and the JPY crosses, even while all their hedge fund clients were busy buying and building long plays. They were also quite sure at the time that they were right. We speculated that the selling might have had something to do with the fact that two of their biggest in-house traders had left the bank and that their positions were being unwound.
In light of the revelations from Friday last, it looks like there’s a more obvious explanation. Goldies knew, about a week ago, that they were to face civil action accusing them of fraud and they rightly saw this as promoting risk aversion in the financial markets. The obvious play in the FX market was to sell the JPY crosses. Now the big question is, was it a sell the rumour buy the fact.
