USD/JPY inter-market: Storms through 105 handle on Bremain-led risk-on

The dollar-yen pair witnessed wild swings this Thursday so far, with the persistent risk sentiment mainly driving the price-action amid increased expectations that the UK will remain in the European Union (EU), in response to today’s referendum.

Markets already presumed Bremain in referendum result and hence, a renewed risk-on wave got triggered, which drove risky assets through the roof at the expense of the safe-havens such as the JPY, gold, US treasuries etc. The VIX index (CBOE Volatility Index), a risk barometer, plunges over 15% from 19.78 to 17.90 levels, suggesting risk-on trades persist in full swing.

The sharp rise in US 10-year treasury yields as against a drop seen in its Japanese counterpart also justifies the latest leg higher in the USD/JPY pair beyond 105 handle. While the Fed fund rates futures remain more or less stable, providing little impetus to the aggressive buying seen in the major, despite ongoing broad based US dollar weakness.

Focus now remains on the EU referendum results due tomorrow, with markets anticipating a majority in the favor of the Remain camp, which is likely to bolster the risk-on trades and add further to USD/JPY’s upbeat momentum.