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Higher US Yields Aids USD/JPY Rebound In NY Trade, BoJ Set To Raise 2023 Inflation Forecast

JPY

USD/JPY edged lower post the Asia close, the pair getting to the 140.75 region in the NY session before rebounding. We got back close to 141.50 by the close, which we track closely to now. This left yen marginally stronger for Monday's session (+0.18%), amid mixed G10 trends. Commodity FX generally rallied, but EU FX (led by EUR) was weaker amidst softer PMI prints.

  • US PMI prints were mixed, with manufacturing beating expectations, but services weaker than forecast. US yields climbed higher though, led by the front end, the 2yr to 4.92% (+8bps), with gains prominent towards the tail end of NY trade.
  • This helped USD/JPY recover from lows, with the US-JP 10yr swap spread threatening to push back above +300bps, recent lows came in under +280bps. US equities pushed up as well, while EU equities were a touch softer.
  • Bloomberg reported that the BoJ is considering a sharp rise in its inflation forecast for the current financial year, to around 2.5% (from the projected 1.8% made in April). Beyond this, into the 2024 and 2025 financial years, the forecasts aren't expected to change too much, which is similar to what Reuters noted yesterday.
  • The government already raised its inflation forecast for this financial year to 2.6% last Thursday.
  • Note the data calendar is empty today, with the June PPI out tomorrow.
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