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11 Apr 2013
Forex Flash: Market volatility in Japan looks to settle soon – UBS
FXstreet.com (Barcelona) - With regards to the JPY and JGBs, it is risk we cannot dismiss entirely, especially given much of this exposure may have been unhedged on the currency side. However, “According to Research Analyst Gareth Berry at UBS, we think the volatility which has plagued the market for the past week will eventually settle down, and investors who can stomach it will probably be rewarded for their patience.”
Indeed, the volatility we are witnessing is not unprecedented. US Treasury and Gilt markets were also buffeted by crosswinds when the Fed and the
Bank of England began their easing programs in March 2009. The key question back then was should one sell before inflation appears, or buy before the central bank does? “Additional clarity on the Bank's intentions should allow volatility to subside.” Berry adds.
Overnight the BoJ appears to have taken steps towards calming the front end of the curve in particular by offering up to Y3.5 trn in yen liquidity for 12 months at a mere 10bp.
Indeed, the volatility we are witnessing is not unprecedented. US Treasury and Gilt markets were also buffeted by crosswinds when the Fed and the
Bank of England began their easing programs in March 2009. The key question back then was should one sell before inflation appears, or buy before the central bank does? “Additional clarity on the Bank's intentions should allow volatility to subside.” Berry adds.
Overnight the BoJ appears to have taken steps towards calming the front end of the curve in particular by offering up to Y3.5 trn in yen liquidity for 12 months at a mere 10bp.