The World's Hottest Trade Is Getting Destroyed Today

The Japanese yen continues to surge against the dollar this morning.

One of the most consensus trades on the planet is betting that the yen will decline against the dollar as Japan implements aggressive monetary policy designed to reflate the economy.

Yet last night's Japanese consumer prices release revealed that deflation is getting worse. And while the Bank of Japan upped its economic forecasts at its policy meeting overnight and said it would hit its lofty 2% inflation target within two years, the market appears to be expressing serious doubts over the BoJ's ability to further weaken the yen today.

As Deutsche Bank FX strategist Taisuke Tanaka pointed out in a note to clients this morning, "On past occasions when the BoJ expanded QE in a risk-off environment, the yen rose as a creditor currency and Japanese equities underperformed, with the result that easing had no real impact. However, we can expect a substantial impact from the new dimension easing as the U.S. macro-economy is improving."

However, a worse-than-expected U.S. GDP release put downward pressure on the dollar this morning, contributing to the short-yen trade unwind.

The dollar-yen exchange rate is trading at 97.70, down 1.6% and just off its lows of the day. It keeps moving further and further away from that landmark 100 level, which hasn't been seen since April 14, 2009.