BoJ Announces US Dollar Purchase Scheme From MOF

The BOJ is to conduct outright purchases of ~$6bn US dollar from MOF for the first time ever, a BoJ official said it was to ensure it has enough ammunition to combat any market or liquidity disruptions caused by a recent resurgence in coronavirus infections.

• The central bank will now conduct purchase operations, buying US dollars from the MOF at any time until the end of March at the prevailing exchange rate.
• The arrangement will serve to circumnavigate the Fed who usually deal with swap lines, by trading internally the operations should not have any impact on exchange rates.
• USD/JPY is lower on the session, last down 13 pips at 103.54, but off lows at 103.42. Some participants have said markets expected more than $6bn in US dollar purchases from the MOF which allowed USD/JPY to drift lower.
• Elsewhere, NTV have reported that Japan are drafting a record JPY 106tn budget for 2021.
• From a technical perspective the move below 103.65, the Nov 18 low signaled scope for a deeper pullback however, to strengthen this possibility, price needs to clear 103.51. A break would reinstate an intraday bearish risk and set the scene for a test of key support at 103.18, Nov 6 low. On the upside, key S/T resistance resides at 104.76, Nov 4 high. Clearance would open 105.68, Nov 11 high.