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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
JPY
- USD/JPY's downtick since the beginning of the year has caught markets offside: as of January 1st, option-implied probability attributed only a 26% chance of the pair trading below 128.50 at today's close, a market move that's resulted in a sharp retracement for front-end USD/JPY risk reversals, with the 3m contract now at the lowest levels since the onset of the pandemic.
Figure 1: USD/JPY 3m risk reversals are most bearish USD/JPY since COVID
- The run below Y130.00 in the pair has largely decoupled FX from short-end rates markets, with the US-Japan 2yr yield spread, with currencies clearly expressing the view that the Bank of Japan will imminently move on their YCC policy.
Figure 2: USD/JPY has decoupled from short-end rates
- Nonetheless, the gap could persist through the January 18th BoJ policy meeting, even in the event of a YCC tweak. MNI sources (piece here) this week detailed that the BoJ could shift the focus of YCC to the short-end, freeing more market movement into the 10y and longer-end of the yield curve, but keeping the short-end (MNI sources see this as 3- to 5-year maturities) under control.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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