MNI China Daily Summary: Friday, April 26

MNI BRIEF: China, US Should Strengthen Dialogue, Cooperation

MNI BRIEF: SNB Framework Reform 'Playing With Fire' - Steiner

MNI: PBOC Conducts CNY2 Bln Via OMO Fri; Liquidity Unchanged

CHINA PBOC INJECTS CNY2 BILLION VIA 7-DAY REVERSE REPOS FRI

MNI: PBOC Sets Yuan Parity Lower At 7.1056 Fri; -4.56% Y/Y

MNI: BAKER HUGHES US RIG COUNT 613; OIL RIGS 506; GAS RIGS 105

MNI: UNIV OF MICHIGAN CONSUMER SENTIMENT FINAL APR INDEX 77.2

EZ/UK T-Bill Calendar: Germany, France Auction on Monday

RPT-MNI: Canada Sticks To Fiscal Anchors, Spends Chunk Of Windfall

MNI BRIEF: Poilievre Calls QE 'Scam' And Would Limit BOC Remit

MNI: Growth Drag From Net Zero Carbon Goal Can Be Offset-OECD

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MNI MARKETS ANALYSIS - Takata Raises Carry Trade Reversal Concerns

FX PiMarkets

Highlights:

  • Year-to-date weakness in JPY has exceeded market expectations, raising the options-implied pricing of further JPY downside after the March, April BoJ decisions
  • The inverse relationship between USD/JPY spot and implied vols reinforces the dominance of the carry trade in muted markets
  • Prelim Rengo pay tallies provide the next point of interest, with the first of several tallies in March seen showing pay rising at fastest rate since 1992

We have written in recent weeks that low levels of implied vol have cleared the way for further JPY weakness, as the subdued backdrop allows for the dominant carry trade theme to dictate spot fluctuations. Takata’s comments overnight not only being reflected in spot, but implied vols are bid across the JPY curve also. 6m implied vols are bid Thursday, posting the biggest one-day uptick of the year so far, and largest since December. Any mean-reversion higher for vols should prove supportive of any USD/JPY correction lower, although we still see the trend outlook remaining bullish and today's sell-off - for now - appears to be a correction.

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Highlights:

  • Year-to-date weakness in JPY has exceeded market expectations, raising the options-implied pricing of further JPY downside after the March, April BoJ decisions
  • The inverse relationship between USD/JPY spot and implied vols reinforces the dominance of the carry trade in muted markets
  • Prelim Rengo pay tallies provide the next point of interest, with the first of several tallies in March seen showing pay rising at fastest rate since 1992

We have written in recent weeks that low levels of implied vol have cleared the way for further JPY weakness, as the subdued backdrop allows for the dominant carry trade theme to dictate spot fluctuations. Takata’s comments overnight not only being reflected in spot, but implied vols are bid across the JPY curve also. 6m implied vols are bid Thursday, posting the biggest one-day uptick of the year so far, and largest since December. Any mean-reversion higher for vols should prove supportive of any USD/JPY correction lower, although we still see the trend outlook remaining bullish and today's sell-off - for now - appears to be a correction.

Keep reading...Show less