Better Sentiment Pressures Yen, Above Y145 Seen Raising Intervention Risk

USD/JPY staged forays above the Y145.00 mark Monday, prompting Japanese officials to try and jawbone the pair below that level and putting market participants on intervention watch. Recovery in demand for risk assets generated buying interest in JPY crosses.

• FinMin Suzuki came forward to reassure the market that his "thinking hasn't changed" and officials stand ready to "take bold action" if they see "excessively one-sided moves or something similar." His comments appeared effective in dragging USD/JPY back below Y145.00.
• Narrowing U.S./Japan yield spreads helped keep a lid on the pair on its second upswing. Post-Asia hours saw them shrink, with 2-year gap tightening 16.0bp and 10-year differential dwindling 19.2bp. Spot USD/JPY pulled back from its London highs and sank into the WMR fix.
• Risk sentiment recovered as equity benchmarks rallied after Asia hours, aided by ISM M'fing miss, which inspired participants to reconsider the projected Fed tightening trajectory. Better mood music made safe-haven currencies G10 laggards.
• Spot USD/JPY trades +5 pips at Y144.60. Above Y145.00 is deemed an area of heightened intervention risk, with the key near-term technical target above provided by Y145.90/146.03, representing Sep 22 high/2.764 proj of the Aug 2 - 8 - 11 price swing. Bears look for a pullback under Sep 22 low of Y140.36.
• The latest batch of Tokyo CPI figures, a bellwether of national price dynamics, headlines the local data docket today. Core prices are expected to have grown 2.8% Y/Y in September after rising 2.6% in the previous month.