Via Bloomberg

It was a strange one yesterday. Yes, we had risk-on tones with equities green across the board and we were expecting JPY weakness, but it just seemed to keep going and going. The USDJPY put in a strong green candle with gains of around 1.6%.

The reason USDJPY jumped higher

According to Bloomberg’s Market Live Blog, there are several possible reasons for this JPY weakness:

  • Japanese funds buying US dollar debt
  • CTA stopping out
  • Macro funds dumping long JPY/Asia risk hedges

The move occurred during the European Session and trading yesterday felt like a game of two halves with Europe pushing the risk-on tone and then the America session pushing it further. We saw steady JPY selling all day. We were looking at the USDJPY. CADJPY and GBPJPY pairs yesterday for longs and they just kept heading north all day. It struck us as steady JPY weakness all day without a sudden move.

Volumes surge

Volumes were nearly double normal levels yesterday and the volume-weighted average price (VWAP) was 110.55 for the USDJPY. Open interest jumped 19,983 contracts and we have the world going short on yen. For us, the best explanation is that the coronavirus fears are subsiding, and a number of larger players are closing long JPY’s on coronavirus fears. This makes sense. If anyone has more insight, please drop a line in the comments. Either way, check out the action around the VWPA of 110.55 today on USDJPY. Our expectations are for more upside from here as long as the risk tone remains positive and traders sell Yen as coronavirus fears subside.