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25 Apr 2016
JPY vulnerability amplified by CFTC record longs - Scotiabank
Analysts at Scotiabank explained that JPY is outperforming as it attempts to retrace a slight portion of Friday’s impressive 2.0% decline—its greatest one day drop since the BoJ’s surprise easing from October 2014.
Key Quotes:
"Central bank risk will dominate this week’s movement in JPY as we look to Wednesday’s FOMC and Friday’s BoJ."
"Last week’s rumors pressured JPY as market participants considered the risk of further interest rate cuts from the BoJ along with the potential for negative interest rate loans to banks."
"JPY’s vulnerability is amplified by record long positioning in terms of CFTC contracts."
"Short-term measures of implied JPY volatility are elevated, and one week risk reversals have shifted in an atypical manner to suggest demand for protection against JPY weakness. Longer-term risk reversals hint to a moderation in demand for protection against JPY strength."
Key Quotes:
"Central bank risk will dominate this week’s movement in JPY as we look to Wednesday’s FOMC and Friday’s BoJ."
"Last week’s rumors pressured JPY as market participants considered the risk of further interest rate cuts from the BoJ along with the potential for negative interest rate loans to banks."
"JPY’s vulnerability is amplified by record long positioning in terms of CFTC contracts."
"Short-term measures of implied JPY volatility are elevated, and one week risk reversals have shifted in an atypical manner to suggest demand for protection against JPY weakness. Longer-term risk reversals hint to a moderation in demand for protection against JPY strength."