BOJ AND ECB STERILIZATION ON EURJPY IS UNDERWAY AT SLOWER EFFORT

The current sterilization undertaken by the BOJ and the ECB on the EURJPY may take longer than expected. Based on the previous sterilization on the previous medium term exchange rate target zone, the two central banks took six months for sterilization effort to slower the strengthening of EUR by JPY. Likely, the current on-going sterilization will be seen in the same time frame.

The current on-going sterilization estimated from 132.00/132.50 (implemented from 131.25) will limit the pressure on EURJPY for estimated 500-600 PIPs or about 50 % from the width of the current exchange rate target zone as permitted by the inter-central banks' communications.

Short on the on-going sterilization (short term band) less profitable by time frame, but in term of volume the EURJPY becomes prospective for large volume investment managers.