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Options for trading the very nervous JPY market

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How are the markets reacting to the announcement that a snap election in Japan has been called, following Monday’s surprise news that the country is now in recession? Saxo’s John Hardy says although it was expected, it’s still unclear whether or not it was priced into the market.

Hardy says the main factor at play over the short-term volatility of the Japanese Yen is not about whether the price is right. Instead he says it’s about whether the market has confidence that the Bank of Japan’s continuing moves to print money will lead to higher asset values. JPY may further weaken but he warns that markets are very nervous.

Hardy says it’s difficult to trade the spot rate at the moment. Instead he favours options, which although expensive, he says should give traders some protection.