JPY: Bears Locked Up; Intervention Unlikely Until 105 Breaks - SocGen

The end of the Kuwaiti oil workers’ strike has dragged crude prices lower (WTI just below $40/bbl) and put a dampener on risk sentiment this morning, though the trigger for the 4% fall in the Shanghai Composite index is more concern that policy will not be so accommodative going forwards. Still, the net result is retreat for NZD, ZAR, AUD, et al this morning.

And the FX winner is, of course, the yen. 10-year JGB yields are down to -14bp, a new low, but the Japan/US real yield differential isn’t moving in the dollar’s favour and that’s what counts here. The BOJ really needs some help from the Fed given that the Japanese authorities seem to have made the schoolboy mistake for asking their G20 colleagues if it would be OK for them to intervene.

Best not to ask until afterwards, I suspect, but with intervention very unlikely unless we get the other side of USD/JPY 105, yen bears remain locked up until the Treasury market can come to their help.