I might take issue with the idea that the euro is going to benefit from rearming given their ongoing efforts to hamstring themselves with the worst energy policy in the world. there is no rearmament or Eurozone growth with their power prices I think
Short USDJPY has been the pain trade post the liberation initial fallout.
Bleeding carry with the USDJPY slowly marching back towards 150 despite US-JP yield differentials narrowing and FED independence in question.
It has made me wonder if the yen is still a safe haven trade.
Yen bulls hope for a quick resolution on the LDP mess with an outcome that does not have fiscal expansionist Sanae Takaichi as PM or that Ueda finds his hawkish voice again.
I feel these are ultimately short term head fakes. Non Takaichi LDP PM would be quickly vulnerable and even a BOJ hike would be likely a dovish hike with market excited then realising the terminal rate is just 1-2 hikes away post.
Going to need the good old Fed giant cuts to drive any Yen strength i feel.
Yes - as I have been writing, I think just as JGBs are no longer longs, Yen is no longer a safe haven. Equities look good - but I can only see Yen moving with other Asian currencies... and US tariffs makes that difficult
I might take issue with the idea that the euro is going to benefit from rearming given their ongoing efforts to hamstring themselves with the worst energy policy in the world. there is no rearmament or Eurozone growth with their power prices I think
Its not an idea - just an observation. Euro has rallied with German fiscal push.
Short USDJPY has been the pain trade post the liberation initial fallout.
Bleeding carry with the USDJPY slowly marching back towards 150 despite US-JP yield differentials narrowing and FED independence in question.
It has made me wonder if the yen is still a safe haven trade.
Yen bulls hope for a quick resolution on the LDP mess with an outcome that does not have fiscal expansionist Sanae Takaichi as PM or that Ueda finds his hawkish voice again.
I feel these are ultimately short term head fakes. Non Takaichi LDP PM would be quickly vulnerable and even a BOJ hike would be likely a dovish hike with market excited then realising the terminal rate is just 1-2 hikes away post.
Going to need the good old Fed giant cuts to drive any Yen strength i feel.
Yes - as I have been writing, I think just as JGBs are no longer longs, Yen is no longer a safe haven. Equities look good - but I can only see Yen moving with other Asian currencies... and US tariffs makes that difficult
Russell, what about rising Japanese inflation (and ST rates, eventually) and the asymmetric upside in the yen from a resurgent safe-haven bid?
Japanese inflation is still pretty tame - so I dont see that as a negative for the currency. If the current account went negative thats another story.
To be clear, I meant higher inflation driving higher ST rates as supporting JPY, not a negative.
I have been surprised at how slow the BOJ has been to raise rates...
I would think that is what's restraining JPY, but hard to reconcile with the large spec long position (as you reference)
Separately, I do like your framework of JPY as an Asian currency. Stronger CNY would also support.
Look at the Aussie dollar - cannot catch a bid. CFTC is max short. Long AUD could be interesting
Pair with CAD!