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26 Apr 2016
Yen: watch divergence between Fed and BoJ - Westpac
Eric Theoret, CFA, CMT FX Strategist at Westpac explained JPY is up, a mid-performer among its peers as it strengthens for a second consecutive session.
Key Quotes:
"JPY risk is elevated into the rest of the week, as we look to Wednesday’s FOMC and Friday’s BoJ policy decision.
Risk reversals highlight considerable (atypical) demand for protection against JPY weakness (USD/JPY upside) at the one week horizon, as longer tenors suggest a shift in the balance of risk with a moderation in the premium for protection against JPY strength (USD/JPY downside).
This week’s events should reinforce the broader theme of policy divergence between the Fed and BoJ, and we suspect that JPY weakness will be amplified by a positioning adjustment given the record bullish JPY positioning (according to the CFTC)."
Key Quotes:
"JPY risk is elevated into the rest of the week, as we look to Wednesday’s FOMC and Friday’s BoJ policy decision.
Risk reversals highlight considerable (atypical) demand for protection against JPY weakness (USD/JPY upside) at the one week horizon, as longer tenors suggest a shift in the balance of risk with a moderation in the premium for protection against JPY strength (USD/JPY downside).
This week’s events should reinforce the broader theme of policy divergence between the Fed and BoJ, and we suspect that JPY weakness will be amplified by a positioning adjustment given the record bullish JPY positioning (according to the CFTC)."