JPY remained on a heavy footing throughout the European morning. Japanese rate hike fears receded after Friday's JiJi news reports, which claimed there would be no change in BOJ policy in December. USD/JPY performed well, along with all the JPY crosses.
In particular, EUR/JPY traded higher on decent model fund demand and ongoing interest from fund names looking to get back into the carry trade. EUR/JPY cleared 154.00 and then moved through the previous high of 154.17 to record a new high of 154.42. USD/JPY was buoyed by the cross-JPY activity, trading up to 117.00. Option related flows capped for a short while before the interest gave way and the pair extended to 117.08. Exporter offers at 117.10 capped ahead of stops from 117.15 up through 117.20.
The near-term focus remains on interest rates, particularly with firm US employment reducing the potential for a Fed cut in rates. The argument for a weaker JPY was compelling after the JiJi news reports but it will be Friday's Tankan report that casts fresh insight into Japanese economic conditions and the interest rate outlook. Until then USD/JPY and EUR/JPY will press higher.
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