Citi(US:C) Xin Lang Cai Jing·2026-01-27 20:27Core Viewpoint - The recent strong three-day rally of the Japanese yen since August 2024 is not enough for Citigroup strategist Daniel Tobon to turn bullish on the yen, as a significant shift in domestic investment towards Japanese bonds is needed for the rally to sustain [1][4]. Group 1: Market Dynamics - The recent yen appreciation is driven by market speculation that Japan and the U.S. are preparing to support the yen, following a drop to nearly 160 yen per dollar, which is close to levels that could prompt intervention by Japanese officials in 2024 [3][6]. - The yen rose by 1% on Tuesday, trading below 153 yen per dollar, following a significant sell-off in the Japanese bond market, which raised concerns about the government's fiscal plans exacerbating its already heavy debt burden [3][6]. Group 2: Investment Opportunities - Tobon highlights that the biggest trading opportunity lies in waiting for a turning point, where a confirmation signal could indicate that the yen has more than 15% upside potential [1][4]. - The recent bond market turmoil has led to a sharp increase in Japanese government bond yields, which may encourage investors to withdraw funds from overseas and reinvest domestically, increasing the likelihood of hedge funds closing carry trades [3][6]. Group 3: Future Risks - Tobon expresses concerns about the risk of the yen weakening again as elections approach next month, indicating that a shift of domestic funds into Japanese bonds would be a stronger signal to buy the yen, potentially alleviating fiscal concerns [4][7].