We have generated a Sell call on GBP-JPY pair on January 14, 2013. We have initiated the following trade:
Fundamental report based call-Sell GBP-JPY at Rs143.80 and target at Rs137. Sell GBP-INR spot at Rs8,774 (February at Rs8819). Buy 15 lots of JPY-INR spot at Rs6,102 (February, at RsRs6143). Time frame: six to nine months.
The trade has been initiated as we expect:
Pound sterling (GBP) to decline against the dollar.
Japanese yen (JPY) to appreciate against the dollar.
Rationale behind the GBP-JPY Sell trade
Relatively stronger growth in the USA over the UK.
One-in-three chance of the UK AAA rating downgrade.
The UK inflation remains above Bank of England (BoE)'s target of 2%.
A weak yen above 95 per dollar to hurt the Japanese economy.
The USD-JPY rally is not supported by the yield differential.
Bank of Japan (BoJ) likely to under-deliver.
The US debt-ceiling issue to trigger a rise in safe haven demand for the yen.
