DeskTalk - Skittish USDJPY and Fragile Liquidity

This report details the desk's cautious outlook on USDJPY, favoring short positions ahead of expected Japanese currency intervention. It highlights risks to liquidity and potential volatility in G10 pairs.

Key Takeaways

• 1.The London desk suggests holding short positions on USDJPY due to the increasing probability of Japanese Ministry of Finance (MoF) intervention.
• 2.Authorities are under pressure to act on JPY given that JPY NEER is 0.7% weaker than April intervention levels and credibility is at stake.
• 3.There is a preference for shorting NZD and AUD against the JPY due to wobbly risk conditions and correlation with US equities.

Table of Contents

• DeskTalk - Skittish USDJPY and fragile liquidity
• Pulse on Asia: Asia Rate Cycles at Crossroads, Gauging JPY Defense

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