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BoJ/Fed Talk Dominates Into Holiday, North Korea Resumes Missile Drills


USD/JPY was volatile in the wake of the Fed's monetary policy decision which set the tone Wednesday, outweighing other risk events. The rate was a touch softer come the end of the day, owing to earlier losses registered during the Tokyo session.

  • The Fed rattled markets by delivering the widely expected 75bp rate hike, while stating that it "will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation," inspiring a dip in U.S. Tsy yields. The initial market reaction was reversed as Chair Powell predicted a higher terminal rate and expressed preference for over- rather than undertightening.
  • Earlier in the day, BoJ Gov Kuroda said Japan is no longer in deflation (albeit he forecast a moderation in price pressures next year), while the minutes from the BoJ's September monetary policy meeting revealed that some members made a reference to FX moves.
  • Liquidity is thinned out as Japan observes a public holiday. Still, domestic headline flow remains busy amid the resumption of North Korea's missile tests, which triggered a civilian warning system in three Japanese prefectures.
  • Spot USD/JPY last deals at Y147.89, barely changed on the day, with familiar technical contours intact. Bears look for a move towards Oct 27 low of Y145.11, while bulls look for a rally above Oct 21 multi-decade high of Y151.95.

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