JPMorgan Econ FI-FX Strategy The outlook for G10 funders-108990597

JapanFXStrategy03July2024JPMORGANwww.jpmorganmarkets.comJapanMarketsResearchJunyaTanaseAC(81-3)6736-1270junya.tanase@jpmorgan.comJPMorganSecuritiesJapanCo.,Ltd.GlobalFXStrategyJamesNelliganAC(44-20)3493-6829james.nelligan@jpmorgan.comJ.P.MorganSecuritiesplcOctaviaPopescu(44-20)3493-5654octavia.popescu@jpmorgan.comJ.P.MorganSecuritiesplcIkueSaito(81-3)6736-8628ikue.saito@jpmorgan.comJPMorganSecuritiesJapanCo.,Ltd.•Lastweekwecameoutofthemid-yearprocesswithaviewtobetacticallyshortfunders(JPYandCHF,link),butmoreforidiosyncraticbottom-upreasonsratherthanabroadtop-downview.•SomesimilaritiesforCHFandJPYcome,forinstance,throughbalanceofpayments,withbothhavingbeendraggedbyFDIanddebtflows.UltimatelycoredifferencesmeanCHFshouldtradeasmoreofasafehaventhanJPYintimesofstress.•USD/JPYhasdisconnectedfromratespreads,andgiventheuncertaintiessurroundingBoJpolicy,littleintentionfromtheMoFtodefendanyspecificlevelofUSD/JPY,andcarry-seekingflows(eveninthefaceofnarrowingratespreads),itisnotcleartousthatthetimeisrighttobelongJPYyet.•Withacyclicallypositiveviewongrowthstillintactatthegloballevel,wearemoreofamindtobeshortJPYversuscyclicalcurrenciessuchasAUD,NOKandGBPonpullbacksinthosecrosses.Indeed,wetookprofitonourAUD/JPYlonglastweek(link)andseeanyJPYralliesdrivenbypossibleMoFinterventionasanopportunitytore-enterJPYshorts.•Lastwe...