USD/JPY trades in a narrow range amid reduced speculative flows. The pair has tested both sides of the market, yet with little success. Large size offers are noted from 118.70 up to the 118.90 region from speculative accounts and hedge funds, while the downside is underpinned by Japanese retail demand and light intra-day bids out of Asia.
Yesterday's sharp gains in JPY caught a number of accounts offside and this resulted in a dearth of interest today. Downside pressure in USD/JPY has not had the momentum to clear decent size bids, while a number of players have favoured the sidelines after steep losses on speculative positions.
Global risk aversion should continue to pressurise carry trades, although today's stabilisation in prices and recovery in the Chinese stock market has allayed fears of a revisit to a 1998 liquidity crunch.
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