Japanese investor demand weighed on JPY. USD/JPY climbed from 120.65 back into 121.00. Good size interest was noted from a Japanese securities house reportedly working an interest on behalf of real money names. Interbank names and model funds joined the buying, yet good size offers from 121.00 capped.
A clean break above 121.00 (121.05/10) would trigger modest size stops and increase momentum, with some CTAs and momentum funds expected to buy the break. European players were encouraged by remarks from US Treasury Secretary Paulson last night. He said that he has been watching JPY more closely since the European complaints. However, JPY was still set in free and fair markets, which allayed fears of any US reprisals at the G7.
This has fueled short covering rather than fresh positioning, yet could result in an increase in speculative positioning and leverage fund activity as the market looks for yield. Japanese investment trust launches are also expected to weigh on JPY, with a clearer and a securities house working a good interest against a variety of currencies. EUR/JPY has benefited, rallying from 157.10 up to 157.60.
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