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Stress is evident in cross-currency basis swaps

Stress is evident in cross-currency basis swaps | 20 March 2020

20 March 2020, USD/JPY

USDJPY trading plan:

Stress, which is evident in cross-currency basis swaps, remains evident in the cost of borrowing dollars abroad. The premium over interbank rates that investors were paying to swap yen for one-year dollar funding was around 72 basis points, still close to the 2016 highs hit last week. Foreign borrowers with $12 trillion of dollar-denominated debt worldwide are hoarding as many dollars as they can in order to be able to service their debts. This is a positive signal for the U.S. currency.

Trading recommendation: Buy 109.30 and take profit 109.70.

David Johnson
Analyst of «FreshForex» company
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