Trying To Figure-Out An Entry Level For A Short JPY Trade
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Softer US inventories boosted oil prices, but equities fell amid concerns about the health of the retail sector. The US data drought goes on but that leaves Treasury yields lower, 10-year TIIPs yields once again flirting with the 10bp area and the dollar therefore, remains largely friendless.
The path between data that is strong enough to revive Fed hiking talk and weak enough to cause a real scare about global growth, might be narrow, but we’re still on it. DXY and TIIPS march hand in hand and while we’re not re-testing DXY range lows yet, there’s certainly nothing sending it back up again. Our strategy of slowly building dollar longs is going to have to emphasise the ‘slowly’ bit for now!
The most eye-catching data release overnight was the biggest monthly Japanese current account surplus since 2007 (Y3trn). Low oil prices have been doing wonders for Japan’s balance of payments. However, on an annual basis, the current account surplus (Y18trn, just over USD 160bn) is actually smaller now than annual net purchases of either foreign bonds or foreign equities.
Over the last couple of years, encouraged by BOJ policy, Japanese investors have fallen in love with foreign assets again and that doesn’t sit comfortably with the notion of an ever-stronger yen. I’m still trying to figure out an entry level for a short yen trade.
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