JPY: Yen Option Volumes Again Firm, USD/JPY RSI (14) Close To Oversold
USD/JPY options are once again dominating the traded volumes so far in Thursday trade. We have seen just over $4.2bn in trades so far, around 42% of total volumes per DTCC.
- In terms of some of the larger ticket sizes, a 110.5 strike with USD put has gone through in $170mn (expiry in Feb 2026). We have also had a number of $100 USD puts with strikes from 150.50 and lower go through, although some of these may be related to risk reversals. In latest dealings though some USD calls at the 153.00 level and higher have also gone through.
- Risk reversals sit lower in terms of ranges from the past 6 months, but we aren't at fresh extremes. These were seen during the MOF intervention episode around early August last year. Implied vols sit up off Jan lows, but are also well off recent cycle highs. The 1 month was last 10.15%, while Q4 peaks last year were closer to 14%. These trends don't suggest the market is expecting a rapid USD/JPY shift.
- The RSI (14) is getting close to oversold conditions, now back at its lowest levels since Sep last year, see the chart below. This provides some caution around extrapolating recent trends lower in USD/JPY aggressively further, although relative US-JP yield shifts are still well down for the week (stabilizing somewhat today).
Fig 1: USD/JPY & RSI (14)
Source: MNI - Market News/Bloomberg
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EQUITIES: HK/China Shares Lower On US Blacklisting, Tech Firmer Elsewhere
Asia Pac equities are once again mixed. Hong Kong and to a lesser extent China markets, have struggled amid fresh US additions to the Blacklist (for companies that have alleged links to the China military). These have included Tencent and CATL, a battery maker. The HSI is off around 2.0% at this stage, while the CSI and Shanghai Composite indices are down more modestly. Trends are more positive elsewhere in the region, aided by tech trends.
- Nvidia's CEO has been in Las Vegas and announced new computer graphics processors, but broader Nasdaq futures sit little changed, last around flat after a strong cash trading start to the week in Monday US trade.
- Tech sensitive plays in terms of South Korea and Taiwan are firmer but away from best levels. The Taiex still up around 1.0%, the Kospi near 0.65%. Investors may have been hoping for more out of the Nvidia presentation.
- Yesterday saw very strong inflows into local Taiwan stocks, in excess of $1.5bn amid broader tech optimism, as Microsoft unveiled plans for AI data centers and Foxconn posted stronger Q4 results.
- Japan markets are performing better today, up +1% for the Topix, which the Nikkei is around 2% higher. Weaker yen levels, along with positive tech spill over are likely aiding sentiment.
- Elsewhere, aggregate shifts are more modest, Australia's ASX 200 up around 0.30%, but Indonesia and Philippine markets track slightly lower.
OIL: Crude Down Slightly, December OPEC Output Lower
Oil prices continue to hold onto most of last week’s gains and are only down slightly today. They have declined moderately this week following technical indicators suggesting last week’s rally was overdone. WTI is 0.2% lower at $73.42/bbl, close to the intraday high after a low of $73.18. Brent is down 0.2% to $76.18/bbl, also close to today’s peak following a brief move below $76.00. The USD is flat.
- Concerns over excess supply in 2025 persist with both the production and consumption outlooks uncertain. Bank of America has restated that new production from non-OPEC countries is likely to exceed global demand growth. Later today industry-based data on US inventories is released.
- A Bloomberg survey showed OPEC output declining 120kbd in December driven by UAE with moderate increases in Libya and Nigeria offset by cuts in Iran and Kuwait.
- Later the Fed’s Barkin speaks and US November trade, JOLTS job openings, December services ISM and preliminary December euro area CPI and November unemployment rate are released.
BONDS: NZGBS: Cheaper But A Subdued Session, US JOLTS & ISM Services Later Today
NZGBs closed 1-2bps cheaper after a relatively subdued session. In relative terms, the NZGB 10-year’s performance was mixed, with the yield differential to US tsys 2bps wider but unchanged against ACGBs.
- Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener. Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.
- Today, the local calendar was empty ahead of ANZ Commodity Prices, the sole release for the week.
- Swap rates are 1-2bps higher.
- Swap rates closed flat to 2bps higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed little changed. 52bps of easing is priced for February, with a cumulative 127bps by November 2025.
