Week in FX Asia – Where is Mrs. Watanabe’s Money Going?

May was a month to forget for those individuals who panicked when they were unable to handle the volatility of the Nikkei. For a larger percentage it was a month when they took some profit off the table in two of the worlds most crowded trades – long the Nikkei and short the Yen.

The last trading day of the month ended in a whimper for many investors with USD/JPY maintaining its correlation with the country’s main equity index. The market seems a tad uneasy to push the dollar much lower, what with supposed standing bids scattered around the ¥100.50 optioned related level and trailing all the way down to the ¥99 handle.

Week ending Japanese data (inflation and industrial output), on the whole, has been relatively good and for many individuals further proof that Abenomics is working. This has resulted in USD/JPY offers more difficult to find.

The Ministry of Finance money flow report week ended May 25th revealed that Japanese players continued to be a net seller of foreign bonds (net ¥1.173-trillion, volume remaining heavy, ¥5.229-trillion sales vs. ¥4.1057 trillion buy’s), and easily surpassing the previous week’s print (¥800.6-billion).

However fresh buying of foreign product still remains and evidence suggests that US treasuries have been the major recipient of Japanese flows (US’s trading at or above +2% has Tsy’s/JGB spread widening) while both OAT’s (French bonds) and BTP’s (Italian bonds) garnered some interest.

The data also suggests that retail investors continue to move out of maturing emerging markets (NZD and AUD) and are happy to reinvest in their own domestic equity market. Of note, foreign investors remain net buyers of Japanese stocks and this despite the plunges recorded in the past week.



* USD ISM Manufacturing
* AUD Reserve Bank of Australia Rate Decision
* AUD Gross Domestic Product
* EUR Euro-Zone Gross Domestic Product
* GBP Bank of England Rate Decision
* GBP BOE Asset Purchase Target
* EUR European Central Bank Rate Decision
* EUR ECB Deposit Facility Rate
* USD Unemployment Rate
* USD Change in Non-farm Payrolls
* CAD Unemployment Rate

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell