Improvement in the broader risk backdrop sapped strength from the yen on Tuesday, as hopes for regulatory reprieve for China's tech sector & positive news re: Shanghai's COVID-19 situation came under scrutiny. Spot USD/JPY topped out at Y129.78 shortly after the European closing bell and pulled back sharply into the WMR fix, but remained above neutral levels.
- Implied volatilities fell across the curve on Tuesday, with 1-week tenor down to a one-month low.
- Spot USD/JPY deals at Y129.41, little changed on the day, with bulls looking to claim May 9 cycle high of Y131.35. Meanwhile, sales past May 12 low of Y127.52 would bring Apr 27 low of Y126.95 into play.
- The Cabinet yesterday approved a Y2.7tn extra spending plan to help ease the burden from rising costs of living.
- The Nikkei reported that the U.S. and Japan have begun working on a joint statement on a coordinated China strategy to be finalised during U.S. President Biden's visit to Tokyo next week.
- Flash Q1 GDP report headlines the domestic data docket today, with final industrial output due later in the day.