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USD/JPY: Nasty 100 pips sell-off takes rate to 112.00

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 23, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    USD/JPY has extended its sharp fall in Asia, with sellers pushing the price well past the 112.50 handle now, setting new lows at 112.00 round number, where some profit-taking has been seen, producing a tepid bounce response.

    Yen buyers overwhelmingly in dominance

    The risk averse environment is undoubtedly favouring the Japanese Yen, with the strong appreciation also implying that speculative flows continue to engage very aggressively in Yen buy-side business, in line with the latest readings via COT, where open interest with increase of Yen leverage account longs continues to expand amid global uncertainty in the markets.

    Yen strength a self-fulfilling prophecy?

    According to Alan Ruskin, Macro Strategist at Deutsche Bank, yen strength may become a self-fulfilling cycle. The Strategist notes that "many of the hedging activities associated with a weak yen in the first four years of Abenomics could go into reverse", adding that "rising Japan FX hedge ratios on foreign investments will make current account surplus recycling difficult, which could lead to a source of ongoing yen strength."
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