Moments ago the 101 USDJPY tractor beam was broken, sending the pair lower, as a red headline hit the tape saying that...
- JAPAN TO IMPOSE NEW RULES ON FOREX MARGIN TRADING, NIKKEI SAYS
Which incidentally was long overdue: with the BOJ scrambling to contain bond (and stock, if only to the downside) volatility, it was always the FX market that was the primary uber-levered culprit moving both asset classes. As such, it was very surprising that in a world in which all correlated asset classes (just look at the USDJPY-ES relationship) are driven by FX, that currency leverage and margin rules have remained largely untouched by regulators and central bankers whose credibility is suddenly slipping away, alongside the surge in global market volatility in the past week.
More from the Nikkei:
- Changes are intended to protect investors and limit scope for speculation, Nikkei newspaper reports, without attribution.
- Firms to be required to settle trade, even when rate movement favors trader; fine for violation up to 100m yen
- FSA to restrict trading in binary options, will ban trades less than two hrs ahead as early as this yr
- FSA to strengthen oversight of cos. with automated trading systems
While the details are still unclear, it is clear that Japan is finally focusing on JPY vol. Which also means that the days of unbridled soaring of the USDJPY pair are limited. And since the US market has been linked to the Yen for the past month, the spike in the Yen is what has caused a sudden air pocket under the US market to develop.
What happens further: we wait and see for the reaction by Mrs Watanabe in a few hours.