Deutsche Bank - "If there is one currency where official signals are increasingly critical it is on the yen. Weekly portfolio flows continue to show equity inflows (including Japanese funds coming back home) significantly outstripping the reallocation out of JGBs. Our own DBSelect data, and IMM numbers concur that ‘the spec’ community has been a remarkably light participant in yen weakness. So where is the selling coming from? The answer: hedging. Hedging by foreigners who were too lightly hedged on their Japanese assets, and more recently, Japanese investors who were over-hedged on their foreign investments. Hedge-related yen selling will remain a dominant driver as long as there is a serious gap between spot and the expected (feared) exchange rate. For now, the biggest risk to yen shorts is if G7 intercedes and tries to contain these exchange rate expectations, of which the G20 meetings (Feb 14-16) represents an obvious opportunity. This is far from a guaranteed success, not least because possible G7 comments on excessive volatility will need to be matched by the threat of intervention, which is very unlikely at current levels. In the meantime, the yen trend still looks set."