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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 last changes hands at Y137.11, up 14 pips on the day, building on its gains from last week.
- The rate crept higher last Friday despite negative risk backdrop. Weak equity performance post-Asia was coupled with an uptick in the VIX index.
- Widening U.S./Japan yield spreads helped push USD/JPY higher. The gap between 10-year yields on respective gov't bonds grew ~9bp while 2-year spread was up ~4bp.
- Options traders added bearish yen bets, with USD/JPY 1-month risk reversal ripping through the breakeven level last Friday. One-month skews have not been that high since mid-Jun. Further out the curve, one-year skews reached best levels since May.
- By contrast, the latest CFTC positioning report showed that leveraged funds continued to cut yen shorts in the week through Aug 16. They reduced net bearish wagers by 2,261 contracts to 11,642, the lowest level since early Mar 2021.
- The spot rate breached the neckline of a double bottom pattern last week, climbing above the 50-DMA in the process, which sets the scene for further gains.
- From a technical standpoint, if we get above Jul 21 high of Y138.88, the path to Jul 14 cyclical peak (Y139.39) would be open. Bears set their sights on the 100-DMA/Aug 11 low located at Y132.12/131.74.
- Looking ahead, BoJ's Nakamura will speak Thursday, ahead of the release of Tokyo CPI on Friday.
Fig. 1: USD/JPY 1-Month vs. 1-Year Risk Reversals
Source: MNI - Market News/Bloomberg
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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