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Demand For Greenback Prompts USD/JPY To Refresh Two-Decade High

FOREX

There has been good demand for the greenback ahead of the Tokyo open, with BBDXY moving past yesterday's highs. Spot USD/JPY popped higher in sync with the dollar index, taking out the Y132.01 figure which capped gains on Monday. Last at Y132.20/25, around +0.25% above NY closing levels, yen is the weakest performer within G10 FX today against the USD.

  • Early Tokyo trade sees consolidation in USD/JPY 1-month risk reversal, which swung above parity on Monday as demand for calls has been building anew since mid-May.
  • AUD/USD overnight implied volatility has crept higher still ahead of the upcoming central bank decision. The spot rate probed the water below yesterday's low on the back of broader greenback purchases.
  • The RBA will set its cash rate target later today. Market expectations have tilted towards a 25bp hike in the last few days, with the OIS strip pricing ~28bp worth of tightening for today. As we enter the final stretch ahead of the announcement, 15 economists surveyed by BBG call for a 25bp hike, 11 expect a 40bp hike and 3 have forecast a 50bp rate rise.
  • U.S. trade balance & German factory orders are due after Asia hours. Riksbank's Ingves & ECB's Wunsch will speak.
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