JPY: Neutral stance – Westpac

Martina Song, Research Analyst at Westpac, suggests that they are neutral on JPY as it has underperformed against the majors since the Jackson Hole speeches.

Key Quotes

“Futures suggest that there were substantial spec positions (long JPY, short USD/JPY) going into the weekend, which would have provided plenty of fuel for USD/JPY short-covering rallies.

Near term direction will be driven by the US dollar. But with inflation still falling well short of its target (Jul ex-fresh food at -0.5%y/y), focus will soon shift to the Bank of Japan meeting (21 Sep) and available monetary policy levers. Markets are likely to be disappointed if they expect increased JGB purchases; instead we could see increased NIRP, ‘operation twist’ or more REIT purchases.”