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Flash: Bearish yen trend has propensity to continue – UBS

FXstreet.com (Barcelona) - Given the market is still struggling to digest the existing easing program, many investors have wondered how could the BoJ hope to ease further if inflation remains elusive.

Moreover, will the USD/JPY spot rally stall when the market realizes this? Fortunately for yen bears, other avenues to ease are still available as we have previously discussed, but even greater policymaker creativity may be called for.

According to Gareth Berry, a Research Analyst at UBS, “Ongoing JGB turbulence has kept yen FX volatility elevated in the long dated tenors. Implied volatilities seem to be pricing in the possibility - however remote - of an eventual JGB market panic. Were this to occur, the USD/JPY spot would quickly shake off its indifference and an acceleration of the bearish yen trend would likely ensue - at least initially.”

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