While You Were Watching That Screaming Guy On The Plane (Again), I Was Buying Yen

Well, it kinda feels like everyone just said fuck it and bought the yen overnight as the holiday shortened week drags on amid heightened geopolitical tension and a reflation narrative that just refuses to die but simultaneously shows few signs of life.

The dollar was looking “offered-ish” pretty much from the word “go” after Janet Yellen’s Q&A at a University of Michigan event brought little in the way of anything.

“Yellen sticking to a moderate pace of rate hikes seems to be spurring some dollar selling, while deteriorating sentiment over geopolitical risks is feeding into risk aversion and buoying the yen,” Kengo Suzuki, chief currency strategist at Mizuho Securities in Tokyo said, adding that “there are many events potentially driving the dollar lower and yen higher such as Japan-U.S. dialog, French election, and deadline for interim U.S. budget.”

Right. And you’ll note that if these markets were normal, you could easily substitute “stocks” for “the dollar” in that last sentence, but these days, bouts of volatility are immediately bought as traders treat any dip in stock prices as an “arb” opportunity because you know, “bid” is the only “fair” price for equities.

Anyway, here’s what we’re looking at this morning:


“Yen by default is preferred amid uncertainties over North Korea, Syria and the French election,” Tomohiro Nishida, senior manager in FX sales team at Sumitomo Mitsui Trust Bank said. “Dollar-buying incentives are fading with unclear prospect of Trump’s tax reform and infrastructure investment.” To be sure, “dollar buying incentives” have been fading for a while now, right alongside “long-end shorting incentives.”

Whatever. Here’s the overnight take from SocGen where Kit Juckes is feeling a bit cynical this morning:

Slightly risk-off with Asian equities down about ½% across the board; Slightly lower bond yields with US 10yr Notes at 2.33%; and a slightly stronger yen is the standout overnight FX mover, up almost ½% but still within the recent range.The world’s press and social media are obsessed with a video of a man being forcibly removed from a plane and the FX market doesn’t really know what to do with itself on a day of limited news.

While 10year Treasury yields are meandering in the lower half of their current rage, TIIIPs yields really aren’t doing anything at all, a 41bp essentially mid-range by recent standards. As time goes by it gets harder to see what’s going to force yields significantly higher, harder therefore to see where the next lift comes for the dollar. Janet Yellen’s conversation at U-Mich yesterday didn’t fill me with excitement either as she talked about moderate growth and policy normalisation. This is a Fed which seems to think that policy normalisation is a 3% Fed Funds rate at some point in the distant future. And doesn’t much care that the market collectively, just doesn’t believe them. I see more of a recipe for an eventual return to yield-hunting than for a major outbreak of dollar strength.

Good stuff on a day where it seems like coming up with good stuff might be hard.

Gold’s holding near its highest since November on geopolitical risk, while crude has erased the March malaise as Saudi output fell to 9.9m b/d in March, Libya declares force majeure at a key export terminal after its biggest field stopped producing just a week after it reopened, and as everyone clings to the “rebalancing is just around the corner” meme. Reminder: API today at 4:30.


UK inflation was a notable econ print overnight, hovering at 2.3%, unchanged from February but still the highest since 2013 and up from just 0.5 percent a year ago.

Asian shares were mixed as are European equities:

  • Nikkei down 0.3% to 18,747.87
  • Topix down 0.3% to 1,495.10
  • Hang Seng Index down 0.7% to 24,088.46
  • Shanghai Composite up 0.6% to 3,288.97
  • Sensex up 0.6% to 29,752.46
  • Australia S&P/ASX 200 up 0.3% to 5,929.27
  • Kospi down 0.4% to 2,123.85
  • FTSE 7393.53 44.59 0.61%
  • DAX 12191.17 -9.35 -0.08%
  • CAC 5113.39 5.94 0.12%
  • IBEX 35 10439.10 1.40 0.01%

Don’t fall asleep. If you get tired, just watch that video of the screaming man being removed from a plane again – plenty of sites are milking that for all it’s worth.


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