Bloomberg (gated) carried info on the note from Morgan Stanley
- an initial Federal Open Market Committee (FOMC) cut of more than 25 basis points could support the yen
- would fuel further pulling out of US assets by Japan, ie. “The yen carry-trade unwind may still be a risk factor behind the scenes”
- “A quick drop in US front-end rates could cause the yen to strengthen further, thus eliciting an adverse reaction in US risk assets.”
Well, yes. The prospect of a 50bp rate cut from the Fed escalated prior to last Friday’s NFP. Its seen calmed a little. I can;t see it myself but market pricing is still around 30%:
This article was written by Eamonn Sheridan at www.forexlive.com. Source