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VIEW: RBC note that "Japanese demand.....>

DOLLAR-YEN
DOLLAR-YEN: VIEW: RBC note that "Japanese demand for foreign bonds has been
resurgent in recent weeks. These flows exceed Japan's current account surplus
and the simplest reading would be that Japan has become a significant buyer of
USD/JPY. As usual, the reality is more complex and, accounting for likely shifts
in hedging behaviour, we think the opposite - domestic investors are selling
USD/JPY and will keep selling in H2. Over the last three months, the
significantly risk-on nature of global markets has left investors outside Japan
absorbing this selling and building USD/JPY longs, trapping USD/JPY in a range.
In the longer-term, we expect the domestic flow to dominate the supply-demand
balance in USD/JPY, carrying the pair significantly lower (target Y95). Implied
vols reflect the last three months of range-trading and we see particular value
in playing our core bearish view in digital puts and put spreads."
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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