On May 18, Citigroup strategists including Adam Pickett and Yasmin Younes said that Citigroup is cutting some bearish dollar positions and adding one-month U.S.-Japan call options.
Citi established a short position in the U.S. and Japan as early as March, however the recent rebound in the U.S. dollar has complicated the situation. The greenback has been spurred higher over the past two weeks as investors have repriced the growth risk on U.S. interest rates.
Separately, Citi expects the Bank of Japan to take a more hawkish stance at its latest policy meeting, but the lack of urgency by Japanese officials in evaluating yield curve control (YCC) policy will be seen as dovish by the market.
The Bank of Japan is still likely to tighten monetary policy in the future, but the market currently believes that the probability of it adjusting the YCC is low.