USD/JPY Hits 105.00 as U.S. Stimulus Optimism Reemerges

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USD/JPY FUNDAMENTAL BACKDROP

Yesterday, President Joe Biden embarked upon stimulus negotiations with Republicans which resulted in an optimistic attitude across financial markets. Emerging Market (EM) currencies are trading up against the U.S. Dollar which reaffirms the risk-on rhetoric while the Yen remains around the key 105.00 horizontal level. As both the U.S. Dollar and Japanese Yen act as safe-haven currencies, the U.S. Dollar involves more ambiguity around this role which is not the case for the Yen. With stimulus discussions underway, the Yen may regain lost gains as investors look to exit their stake in the greenback and look to higher yielding assets. The Nikkei 225 is trading higher today which could increase demand for the local currency going forward.

 

USD/JPY OPTIONS EXPIRIES

 

Notable options expiries (see below) are also expected this week which could see a tug of war between stakeholders of the respective strikes. Generally, large options expiries are preceded by price moves toward the particular strike as it approaches expiration as investors push for their options contracts to expire in the money.

 

February 4, 2021:

 

Y104.30-40 ($1.55bln)

Y105.00 ($1.1bln)

February 5, 2021:

 

Y103.00 ($1.0bln-USD puts)

Y104.95-105.00($1.0bln)