The hawkish BoJ outcome in July, followed by a dovish Fed and weak NFP, sparked numerous events that prompted the plunge in USD/JPY on Friday 2nd and Monday 5th August which in turn resulted in major moves in equities and bonds in both Japan and the US.
Enclosed is a presentation on Japan developments and the potential global and US implications.
This presentation served as the basis for our 8/14/2024 Webinar - where we focused on:
- Yen carry – some sense of scale and liquidation of leveraged positions
- Other JPY currency dynamics that could start to change including:
- JPY hedging flow potential changes amongst Japanese investors
- JPY hedging flow potential changes amongst foreign investors
- JPY & safe-haven demand and similarities with the 1998 risk-off period
- Fed policy and where we are in the US business cycle is a big driver of JPY
- Japan repatriation flows will be limited if yen rates rally along with USTs
- We highlight relative US vs Japan real rates have coincided with risk-off periods
- 2yr UST momentum (and versus Fed Funds) hint at an imminent Fed easing cycle
Please see the PDF report link above for the full write-up with charts…