Numerous option maturities on USD/JPY this morning are helping to contain price action with strikes at 121.00, 121.05, 121.10, 121.20, 121.30, 121.35, 121.40 and 121.50. USD/JPY currently trades at 121.41, slightly down from morning opening levels.
The interest in options is seen tied to the U.S.-China talks with a good deal of speculation that has emerged that the discussions will not go as well as hoped. So far, Tsy Paulson's this morning have guardedly attacked China stating that Americans are impatient with China and that the China talks are facing skepticism. This mirrors the sense of discord that the market is expecting from the discussions.
US yields have edged off morning highs back towards 4.79% on the ten-year bond, also tempering USD/JPY gains. The US two-year spread over JGBs is currently at 393 bp, little changed from yesterday but at the top of the recent 365-395 bp range that has contained recent dealings.
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