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JPY Moves Contained Despite Strengthening Rhetoric, USDMXN Selloff Extends

FOREX
  • The Japanese yen was in focus Wednesday, as Bank of Japan, Ministry of Finance and FSA officials met to discuss financial markets, raising speculation that currency market intervention could be imminent.
  • USDJPY traded as low as 151.03 amid firmer language on speculative weakening in the yen and the ability to counteract these moves. Earlier on Wednesday, USDJPY traded to the highest level since 1990 at 151.97. Subsequently, MOF Kanda’s press conference failed to spark a further correction lower for USDJPY and the pair has since traded in a tight range between 151.20-40 as markets contemplate the developments ahead of the long holiday weekend.
  • Diverging monetary policy trajectories and this verbal intervention could place CHF in a particularly vulnerable position to further yen strength at this juncture, corroborated by CHFJPY (-0.35%) trading below 167.00 this morning, and printing a fresh three-month low for the cross.
  • Elsewhere in G10, major currency pairs and the dollar index held very narrow ranges. Both EURUSD and GBPUSD extremes are roughly 30 pips apart.
  • Perhaps most the interesting development occurred in emerging markets with USDMXN breaking key support and trading at the lowest level since 2015. The next target for the selloff resides at 16.4218, a Fibonacci projection.
  • Initial easing from the central bank has not weighed on the MXN, as analysts have highlighted there remains room for carry compression without a negative impact on the currency. Furthermore, the low vol environment remains supportive for high carry FX, local fundamentals remain solid and election risk premium remains low.
  • Australia MI Inflation Expectations and February retail sales data are highlights overnight on Thursday, before German retail sales figures. Later in the day, final readings for Q4 US GDP, initial jobless claims, MNI Chicago PMI and pending home sales are all scheduled, alongside Canada January GDP.
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