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§ 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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