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4 Jan 2016
USD/JPY: shorting is less in terms of carry - Nomura
FXStreet (Guatemala) - Analysts at Nomura explained that USD/JPY started trading weakly at the beginning of the New Year, undercutting 120 today.
Key Quotes:
"Risk sentiment weakened as concern over the Middle East increased and Chinese economic data weakened further, which likely led to further unwinding of USD/JPY long positions.
However, JPY short positions at IMM had already reached $3.1bn by 22 December. We estimate JPY short positions to have declined further to $1.4bn by 28 December, and JPY short positions are likely at almost neutral levels after today’s JPY appreciation. As the rate differential between the US and Japan continues widening, USD short positions against JPY are getting less attractive from a carry perspective.
After JPY short positions are unwound, USD/JPY depreciation should slow. In addition, mid-term flows remain large net JPY selling in 2016, in our view. From a supply-demand perspective, we see only limited downside risks for USD/JPY from the current level."
Key Quotes:
"Risk sentiment weakened as concern over the Middle East increased and Chinese economic data weakened further, which likely led to further unwinding of USD/JPY long positions.
However, JPY short positions at IMM had already reached $3.1bn by 22 December. We estimate JPY short positions to have declined further to $1.4bn by 28 December, and JPY short positions are likely at almost neutral levels after today’s JPY appreciation. As the rate differential between the US and Japan continues widening, USD short positions against JPY are getting less attractive from a carry perspective.
After JPY short positions are unwound, USD/JPY depreciation should slow. In addition, mid-term flows remain large net JPY selling in 2016, in our view. From a supply-demand perspective, we see only limited downside risks for USD/JPY from the current level."