9 Jul 2015
JPY and CHF prone to volatility in a Grexit scenario – BTMU
FXStreet (Barcelona) - Derek Halpenny, European Head of GMR at Bank of Tokyo-Mitsubishi UFJ, explains that EUR/JPY and EUR/CHF might be the notable movers in the FX space next week in case of a Grexit scenario.
Key Quotes
“In terms of foreign exchange, we would certainly look at EUR/JPY and EUR/CHF as potential notable movers next week. In a sense one of these currencies (JPY) has lost its safe-haven status, while the other (CHF) despite official efforts has managed to maintain that status.”
“For the yen, we believe from a positioning and valuation perspective it is vulnerable to further gains and possible sharp increases in volatility. The IMM positioning shows that the current speculative position is larger than average through the period since ‘Abenomics’ began while the margin retail positioning also shows large yen short positions. Through TFX alone (which accounts for only about 10% of the total margin trading market in Japan), the margin retail sector is holding a USD/JPY long position of close to USD 6bn. If you were to assume a similar scale of positioning in the larger OTC market and extrapolate, this sector alone may hold a USD/JPY long position in the region of USD 60bn. It is true that the margin traders tend to buy on dips and sell on rallies, but for sure there are examples of sudden bouts of capitulation that leads to a drop in USD/JPY and a reduction in short yen margin positioning. A Grexit would be an event that could lead to such a capitulation.”
Key Quotes
“In terms of foreign exchange, we would certainly look at EUR/JPY and EUR/CHF as potential notable movers next week. In a sense one of these currencies (JPY) has lost its safe-haven status, while the other (CHF) despite official efforts has managed to maintain that status.”
“For the yen, we believe from a positioning and valuation perspective it is vulnerable to further gains and possible sharp increases in volatility. The IMM positioning shows that the current speculative position is larger than average through the period since ‘Abenomics’ began while the margin retail positioning also shows large yen short positions. Through TFX alone (which accounts for only about 10% of the total margin trading market in Japan), the margin retail sector is holding a USD/JPY long position of close to USD 6bn. If you were to assume a similar scale of positioning in the larger OTC market and extrapolate, this sector alone may hold a USD/JPY long position in the region of USD 60bn. It is true that the margin traders tend to buy on dips and sell on rallies, but for sure there are examples of sudden bouts of capitulation that leads to a drop in USD/JPY and a reduction in short yen margin positioning. A Grexit would be an event that could lead to such a capitulation.”