Friday, September 19, 2014

Maybank FX Flash - JPY Crosses: Broad Sell-Off



JPY Crosses: Broad Sell-Off

§  The JPY bounced higher against the majors this morning. The USD/JPY moved above the 109-handle to 109.240, while the GBP/JPY, EUR/JPY and CHF/JPY rose 180.300, 141.150 and 116.950 respectively.
§  There seems to be a couple of reasons driving the move in the JPY this morning. First, it could be due to the weak economic data out of Japan to date, including the cabinet office revising downwards their assessment of the economy this morning. Second, reports out of Japan suggest that the government could move ahead with the Government Pension Investment Fund portfolio reallocation without the need for legislative changes.  This suggests possible earlier than expected portfolio outflows in the near term, possibly weighing on the JPY further.
§  Finally, there could have been some long-JPY bets ahead of the Scottish referendum as a hedge against risk aversion to a ‘Yes’ vote. However, as results from the Scottish referendum trickled-in showing a support for a ‘No’ vote (to independence), there could have been an unwinding of long JPY positions against the majors.


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