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Analysts at Scotiabank explained that outside of the dollar’s recent spike again the JPY was outperforming and has been extending its recent haven-driven rally and testing fresh highs at levels last seen in late June.

Key Quotes:

“Sentiment is dominating and has been delivering JPY strength in the context of broad-based risk aversion.”

“Fundamentals are delivering added support following the release of stronger than expected Q2 GDP figures, and Japan releases industrial production and trade data later this week.”

“Yield spreads are narrowing in a JPY-supportive manner and extended bearish speculative positioning leaves JPY vulnerable to adjustment.”

“Risk reversals are pricing a sizeable premium for protection against JPY strength, with most tenors testing fresh highs at levels last seen in early February.”