Flows and Orders/FXWW News/USD/JPY

USD/JPY: Massive expiries ($27 billion) over next 5 days

Plenty of excellent information in the chat-room today and thanks to 888 for publishing this report from BofAML.

“Publicly available data shows there are $27,000,000,000 of USDJPY strikes expiring (103-103.90) over the next 5 business days. This figure, even if only half of this was open interest , is in the upper regions of the largest exposure market has seen in years. The markets expectations for a Fed Taper have been gradually increasing, but with that much exposure it would take a real outside surprise for USDJPY to be able to break itself away from the current 102.60/103.40 range – especially when one considers a large percentage of that $27,000,000,000 is centred around 103 and expires over the next 36hrs. BofAML’s APAC trading desk is flat in USDJPY here and anxiously awaits 2pm EST on Wednesday.”

  1. So much option trade on usd-jpy. Do these guys hedge against their spot positions at 103 plus level? if true, then, u-jpy will drop. if false, u-jpy may go up if these guys also push up in spot. For option writers, they want u-jpy to drop and they can sell it on spot.

    Fed won’t tapper in this meeting. But, they may update their forward guide of Fed rate to start to hike in 2nd Q of 2014 in order to boost short-term bond yield.

    Low Fed rate in long-run is an major cause (macro driver) for low inflation, disinflation, deflation, etc. My study of Japanese lost decades with zero rate and quite low inflation. BoJ currently measure will fail to boost inflation. Only BoJ start to hike rate to 2%, inflation will rise above 2%.

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