JPY Strength is the Main Feature of FX Markets - BBH
Research Team at BBH, suggests that the main feature in the foreign
exchange market continues to be the surge of the Japanese yen.
Key Quotes
“A
convincing explanation of the yen's strength seems elusive. Until last
week, which means through the fiscal year-end last month, Japanese fund
managers have been buying foreign bonds at a near-record pace. Foreign
investors, for their part, have been dumping Japanese shares. The main
buyers of the yen appeared to be speculators, wherein the futures
markets, they have amassed a near-record net and gross long yen
position.
Our Tokyo contacts point to an another source of
flows that have been yen positive, however, concrete figures are not yet
to be found. Japanese exporter is suspected repatriating overseas
earnings at the start of the new fiscal year. The yen has strengthened
against the dollar four of the five past Aprils. Month-to-date, the yen
has soared nearly 4%. Its closest rival is the Swiss franc, which has
gained about 0.6% against the greenback.
The yen's rise has
coincided with a sharp fall in the US 10-year premium over Japan. The
premium peaked on March 22 near 204 bp. Today, it is below 180 bp. We
have suggested a technical objective for the dollar int he
JPY106.80-JPY107.00 area. Despite the talk of a secret agreement struck
in Shanghai to weaken the dollar, Japanese and American officials are
likely as surprised by the yen's strength as are a market participant.
This is most likely not an engineered move.”
(Market News Provided by FXstreet)
