The combination of a generally softer USD and the "carry trade" theme has held USD/JPY tight. Tuesday's U.S CPI data gave every indication that price pressures are under control and that a Fed easing later in the year was still a possibility. The data took the edge off the USD and sent EUR/USD higher, which in turn has driven EUR/JPY to new highs of 163.87.
The Yen has also been hit by fresh carry trade activity as risk is clearly back on the menu. USD/JPY has been held just ahead of 120.60 and exporters, real money accounts and central bank activity are in the frame. Talk of Yen repatriation following bond coupon and redemption payments has also impacted. USD/JPY Offers are said to run to 120.60 up to 120.75 and there is further talk of a large 120.75 option barrier.
Other option plays reportedly include a 400 mln 120.00 expiry today and 121.00 barriers. Looking ahead, expect the Yen market to steady ahead of Thursday's Japanese GDP data and the speech from BOJ Governor, Fukui.
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