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Oct 25 - 02:55 PM

JPY: Winter Is Coming - Credit Agricole

By eFXdata  —  Oct 25 - 01:30 PM

Credit Agricole CIB Research discusses the impact of the coming winter season on the JPY.

"The northern hemisphere winter could have potentially two contrasting impacts on the JPY. First, Covid, like the flu, spreads more easily when people gather in large groups indoors...One of the sources of the JPY’s recent weakness was the return of the pre-pandemic yield differentials between Japan and the rest of the G10 as investors priced in central banks (other than the BoJ) withdrawing monetary stimulus," CACIB notes. 

"The second impact comes from energy prices. Japan has the largest net trade energy deficit as a share of its GDP in the G10, so higher oil prices are a significant negative terms of trade shock for the JPY. A La Nina weather event threatens a colder-than-usual winter. But the market has to a large extent already priced a cold winter via higher oil and gas prices," CACIB adds. 

Crédit Agricole Research/Market Commentary


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