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RBC See USDJPY as Reflective of Positioning Unwind, Rather Than YCC Expectations


RBC write on the recent pullback in USDJPY:

  • There is a growing narrative that the fall in USDJPY reflects the likelihood of policy change at the BoJ’s July 28 meeting.
  • An unwind of very extended short-JPY positions seems like a more plausible explanation, however.
  • They note that July was already the favourite month for the BoJ to further relax YCC, though they add that may have subsequently slipped back.
  • They would not rule out a further widening of the YCC band at this month’s meeting, nor a swift kneejerk move lower in USD/JPY is that happens.
  • RBC conclude that the risk is that the JGB reaction is modest and markets quickly turn back to US rates as the main driver for USD/JPY, as was the case through H1.
MNI London Bureau | +44 203-865-3809 |
MNI London Bureau | +44 203-865-3809 |

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