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Forex pairs in this Article » USD/JPY (Barcelona) - Volumes were generally sound in the first trading week of 2013 and again the USDJPY stood out for G10. JPY flow was the only currency to surpass 100% of average, and surprisingly the bulk of the flow was actually net buying. According to Research Analyst Geoffrey Yu at UBS, "Asset managers and hedge funds both sold USDJPY, though we suspect this was due to a combination of profit taking in addition to reflection of some options positions being put on to play the upside."

"Overall though, USDJPY positioning remains flat on a 3m basis and markets are waiting to see if Japanese names are willing to enter the fray as the relentless rise in the pair may prove too hard to ignore." he adds. The combined assets of Japanese real money alone (Investment Trusts, Pension Funds and Insurers) are more than enough to overwhelm any offshore collective positioning, and for now bulls will probably need to bear in mind that Q1 will mark the end of the Japanese Fiscal Year which could bring unwelcome redemption flows.

Elsewhere, the dollar had its worst week since November as the market decided to brush off suggestions of early tightening from the FOMC minutes and continued to favor the 'dollar off, risk on' trading week, but EM currencies were the largest beneficiaries. With the exception of AUD and CAD, risk currencies within G10 either saw very little volume or were flat on the week.
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