JPY extended gains in a holiday thin European session. USD/JPY remainder under pressure, with interbank names following yesterday's theme. The 117.40 level came under pressure in the wake of a stronger than expected German Ifo. Standing bids from Japanese clearers at 117.40 and 117.30 gave way and the pair traded down to 117.22.
Real money demand was behind the flows, while vague rumours of quasi-official demand also did the rounds. USD/JPY managed to find support ahead of 117.20, where option related interest and further Japanese name bids were noted. EUR/JPY traded on the heavy side but was helped by a firmer EUR/USD in the wake of the German sentiment data. Proprietary name bids emerged ahead of the 150.55 support, along with light bids from Asian names. Over the holiday period bother pairs are expected to remain corrective.
Some feel this is the start of a trend that could see the JPY strengthen across the board as the huge build up of JPY carry trades are pared back ahead of year-end. However, long-term JPY bears see the move as corrective claiming that the environment that contributed to JPY weakness has not changed.
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