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日本央行如期加息,“套利交易”平仓担忧加剧

The Bank of Japan has raised interest rates as scheduled, heightening concerns over the closure of "arbitrage trades."

wallstreetcn ·  Jan 24 01:03

Analysis suggests that the potential risks of the Bank of Japan's interest rate hike cycle still exist. Currently, the Forex Options market is pricing in a higher probability of a stronger yen. If the range of spot execution prices is expanded or the expiration time is extended, the tendency for the yen to strengthen will increase, and this tendency is more pronounced in the euro against the yen.

As the Bank of Japan raised interest rates by 25 basis points on schedule, concerns about the closure of arbitrage trades are continuously intensifying. Earlier today, Japanese yen Options Trading traders inferred that the likelihood of the yen strengthening in the coming weeks is greater, suggesting that the market has already factored in some risks.

On January 24, Friday, the Bank of Japan decided to raise interest rates by 25 basis points to 0.50%, in line with expectations, marking the largest increase in eighteen years. The Bank of Japan stated in the announcement that as wages continue to grow, the inflation rate has gradually moved towards the 2% target.

However, Bloomberg macro strategist Simon White pointed out that Japan, as a 'debt-laden' country, faces potential risks in raising interest rates after a prolonged period of being close to zero or lower, making the likelihood of a stronger yen greater.

It is worth noting that after the Bank of Japan's first interest rate hike at the end of July last year, global financial markets were shaken. At that time, the yen strengthened significantly, Japanese and USA Bonds yields fell, and global stock markets faced a sell-off. Although the market eventually recovered, with the S&P 500 Index reaching a new high in September, investors still have lingering fears.

Currently, the Forex Options market is pricing in a higher probability of a stronger yen. Taking the USD/JPY pair as an example, for a one-month single barrier option, the implied probability for a strike price of 154.4 (below the spot price) is 68%, while for a strike price of 158.4 (above the spot price) it is 62%.

If the range of spot execution prices is expanded or the expiration time is extended, the tendency for the yen to strengthen will increase, and this tendency is more pronounced in the EUR/JPY pair. The implied probability of the yen appreciating by 3% against the euro within a month is about 30%, while the probability of depreciating by 3% is only 24%. This also means that the possibility of closing arbitrage trades is greater to some extent.

Currently, the USD/JPY is reported at 155.41, down 0.42%.

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White also stated that the market reaction after this interest rate hike may not be as severe as last summer. This is because the yen had already appreciated significantly before last year's rate hike, and this time traders may be better prepared. However, he also warned that:

The potential risks of the Bank of Japan's interest rate hike cycle still exist, and the bank's balance sheet represents a tail risk that is severely underestimated by the Global market.

The Bank of Japan also mentioned the issue of exchange rates in the announcement, stating that a weaker yen helps boost inflation expectations. At the same time, the central bank indicated that the overall performance of the Global financial markets is stable, but the uncertainties facing the economy and prices remain very high, and real wages will continue to decline significantly.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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