JPY seen gathering traction near term – Scotiabank

The demand for the Japanese safe haven currency is expected to pick up some pace in the short-term horizon.

Key Quotes

“JPY is testing fresh November highs, outperforming most of the G10 currencies with a 0.4% gain and ignoring dovish comments from BoJ board member Funo”.

“The recent narrowing in longer-term spreads is JPY-supportive, with a notable 10bpt contraction in the U.S.-Japan 10Y yield spread to 230bpts”.

“Risk reversals have also shown signs of a decisive turn with a renewed rise in the premium for protection against JPY strength. The premium had moderated considerably over the past few weeks, reaching multi-month lows at levels last seen in mid-May. The near-term balance of risk appears to favor modest JPY strength”.