USD/JPY edged higher in thin liquidity Monday as Japanese financial markets were shut in observance of a public holiday, with participants preparing for "Super Thursday," which will see the Fed, BoJ and several other major central banks deliver their monetary policy decisions.
- The yield on 10-Year JGBs keeps testing the 0.25% cap imposed by the BoJ, which puts any enforcement actions by the central bank under scrutiny. As a pre-Tokyo reminder, U.S. Tsys had a wobbly NY session Monday, finishing flat to 7bp cheaper across the curve.
- The equity space struggled for a clear direction Monday, albeit U.S. benchmarks managed to finish in the green. while the VIX index slid.
- Short-end USD/JPY risk reversals continued to shift in favour of yen calls amid lingering intervention threat, albeit the pace of these moves slowed in comparison to last week's swings.
- Meanwhile, the latest CFTC data showed continued addition of bearish yen bets. Leveraged funds added 18,836 net short contracts in the week through Sep 13, the largest increase since Mar. Asset managers trimmed net JPY short positions by 4,808 after they reached an all-time high the week before.
- Spot USD/JPY last seen at Y143.30, up 10 pips on the day. On the topside, the next line in the sand is at Y145.00, which capped gains earlier this month. Bears look for a sell-off past Sep 9 low of Y141.51.
- All eyes are on Japan's national CPI figures today. The BoJ-preferred core CPI is expected to have quickened to +2.7% Y/Y in Aug from 2.4% prior, with the central bank's Policy Board set to meet Thursday.