Why the USDJPY jumped 1.6% yesterday.
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 a number of reasons circulating as to the reason for 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. I was looking at the USDJPY. CADJPY and GBPJPY pairs yesterday for longs and they just kept heading north all day. It struck me as steady JPY weakness all day without a sudden move.
Volumes were nearly double normal volumes 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 and his dog going short yen. For me, 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 to me. 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. My expectations are for more upside from here as long as the risk tone remains positive and traders sell Yen as coronavirus fears subside.