JPY experienced wild price swings in the European morning. Initially, broad based JPY gains were noted in the wake of sharp GBP/JPY and AUD/JPY selling. The catalyst was weak Australian CPI release and less hawkish comment from BOE Governor King. This prompted a broad based adjustment. USD/JPY tested either side of the market.
The pair sank early on, breaking through 121.00 and 120.80 to record a 120.66 low as a number of sizeable stops were filled. Trust banks and real money names emerged at the low, fueling a modest recovery. The highlight of the session was a large US name pushed through a good size GBP/JPY order, with GBP 1.5 billion reportedly pushed through the legs. This forced a massive scramble in the market, with EUR/JPY, AUD/JPY, GBP/JPY and USD/JPY all recovering.
EUR/JPY recovered from 156.72 to regain the 158.00 handle and USD/JPY cleared stops at 121.40 and 121.50. There is some concern over the prospect for carry trades. Today's price action was reminder of how quickly the trade could unwind if players all exit together. For now core positions remain but the market is clearly shaken.
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