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JPY Slips as BoJ Step In to Cap Yields

FOREX
  • The rally in the Japanese curve continued apace across Asia-Pac hours, pushing the 10y yield to the highest levels since early 2016 and putting the BoJ's yield cap under considerable pressure. In response the Bank stepped in with an unscheduled asset purchase programme, committing themselves to buying an unlimited quantity of 10y JGBs as part of their yield curve control policy tool. USD/JPY rallied in response, adding around 30 pips to touch session highs of Y115.88, keeping the JPY close to the bottom of the G10 pile.
  • SEK underperformed all others through the European morning, including the JPY, following a dovish turn from Sweden's Riksbank. The bank's governor Ingves stepped in to block a growing view among the bank board that the pace of asset purchases should be tapered over the coming period. As a result, EUR/SEK rallied to touch 10.4849, just shy of the Monday high at 10.4868.
  • US inflation data takes focus going forward, with markets expecting a new multi-decade high for the Y/Y read at 7.2%, with more pressure on the core reading also. Weekly jobless claims also cross, with speeches from ECB's de Guindos, Villeroy and Lane. The Mexican central bank decision is also due.

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