The Week Ahead

Volume 92 - Nets still low

Good morning!

Easter week is usually a more quiet week.

What’s the takeaway from the BoJ? A dovish hike, the easiest set-up going for JPY, this was what I shared in last week’s post. No more YCC, ETFs and NIRP. Many years of NIRP finally over, but the market seemed unphased. Real rates remain negative, so current trends should remain intact and continue (JPY down/NKY up). If you recall, many were claiming that the NIRP exit should’ve been the medicine for the yen; how wrong were they? It shows the long road ahead for the BoJ and their currency. The current scenario is different to when the USD/JPY carry trade was really exploding higher, that was when the Fed was hiking. Now they are not. Regardless… do I still see a possibility of USD/JPY heading north towards (or above) 155? Yes. As I have said from the get-go this year, carry works, so own it. Up here, I’d prefer to express the trade by buying 3m/6m upside on the USD/JPY spot; AUD/JPY upside works, too. In short, expect future BoJ policy to slow the yen depreciation but current trends to continue as I mentioned. Still not the safe haven it is meant to be!

We will start this post with FX since we are on the topic.