26 Oct 2015
USD/JPY: bullish prevails despite Yen strength - Scotiabank
FXStreet (Guatemala) - Eric Theoret, CFA, CMT FX Strategist at Scotiabank explained that the JPY is outperforming its G4 peers with a modest 0.3% gain, rallying back to its 200 day MA after reaching a fresh two-month low.
Key Quotes:
"JPY risk is elevated this week as we consider the potential for further decline driven by relative central bank policy, with a focus on divergence given Wednesday’s Fed and Thursday’s (late NA session) BoJ policy decision.
Roughly two thirds of the Bloomberg forecast contributors (23 of 37) expect an hold in the pace of BoJ purchases, currently running at an annualized rate of ¥80trn.
14 expect an increase in the pace, ranging from ¥85trn to ¥100trn. Options prices have undergone a dramatic shift over the past two months, with a notable moderation in demand for protection against downside risk in USD/JPY (JPY gains) and current levels suggesting a modest premium for those looking to protect against USD/JPY gains (JPY decline). We are biased to upside risk in USD/JPY."
Key Quotes:
"JPY risk is elevated this week as we consider the potential for further decline driven by relative central bank policy, with a focus on divergence given Wednesday’s Fed and Thursday’s (late NA session) BoJ policy decision.
Roughly two thirds of the Bloomberg forecast contributors (23 of 37) expect an hold in the pace of BoJ purchases, currently running at an annualized rate of ¥80trn.
14 expect an increase in the pace, ranging from ¥85trn to ¥100trn. Options prices have undergone a dramatic shift over the past two months, with a notable moderation in demand for protection against downside risk in USD/JPY (JPY gains) and current levels suggesting a modest premium for those looking to protect against USD/JPY gains (JPY decline). We are biased to upside risk in USD/JPY."