USD/JPY and other JPY crosses remain bid with JPY still the funding currency of choice. Interest was on the light side but dealers noted continuing demand for GBP, AUD and NZD from Japanese retail investors. This helped to maintain upward pressure in GBP/JPY, AUD/JPY and NZD/JPY. EUR/JPY maintained a supportive tone as a result of the firmness in these JPY crosses.
USD/JPY was buoyed by the dollar bid tone into today's US FOMC meeting. The pair traded close to the 119.50 region throughout the European morning. A US investment house was a good buyer, although gains were stymied by sovereign name selling and large Japanese sell orders from 119.60 up to 119.90. A large 119.50 option strike also restricted price action, leaving choppy price action around the 119.50 pivot. Near-term price action is expected to favour the dollar, with traders positioning for a hawkish Fed statement.
Japanese rate hike expectations have also been reduced, which should see USD/JPY as the main beneficiary for intra-day flows. Defensive selling ahead of 120.00 should increase as we approach 119.75/80, with a concentration of sellers ahead of these triggers.
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