BoJ Inaction, Demand For Save Havens Throw Lifeline To Embattled Yen

Defensive feel took hold in G10 FX space, even as latest headline flow failed to add much to the familiar picture. Growth proxies such as AUD, NZD and CAD lost ground, with JPY and CHF lodging gains. Demand for safe havens allowed the yen to snap its recent rout, which earlier this week drove USD/JPY through several round figures to fresh multi-year highs.

• The yen drew additional support from the BoJ's inaction with regard to the move above 0.23% in benchmark 10-Year JGB yield. A break above that level triggered BoJ fixed rate operations back in Feb as the central bank sought to defend the upper end of permitted 10-Year yield trading range (-/+0.25%). There was speculation that the level could again act as a trigger for BoJ intervention but the central bank chose to stay on the sidelines.
• Spot USD/JPY pulled back below the Y122.00 mark to a session low of Y121.51 from yesterday's Y122.44 cycle peak. Implied volatilities remained elevated, even as those further out the curve posted marginal downticks.
• Aiding the retreat in USD/JPY was broader greenback weakness. The USD remains among the weakest G10 performers in the lead-up to the London session as lower U.S. Tsy yields bite.
• BoJ's Kuroda said that yen depreciation doesn't mean that the Japanese currency has lost credibility and (together with FinMin Suzuki) underscored the importance of stable FX rates.
• Final U.S. Uni. of Mich. Sentiment, German Ifo Survey & UK retail sales take focus from here. Speeches are due from Fed's Williams, Daly, Barkin & Waller, BoC's Kozicki & Norges Bank's Bache.