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."
