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JPY TWI Remains Under Pressure Ahead of MoF Intervention Confirmation

FOREX
  • Strength in the single currency so far Friday is keeping EUR/JPY on the front-foot and a break and close back above 170.80 would mark a resumption of the longer-term uptrend, opening 171.56, the Apr 29 high and key resistance. Options flow so far this week seems to remain highly cognizant of the downside risks, however, with $5 in puts bought for every $3 in calls since Monday.
  • Markets await confirmation later today for the size and extent of FX intervention across the past month - and expectations are for ~$60bln (Y9.4trl) to have been sold across two phases this month. Headlines cross at 1100BST/1900 local time - and if alongside expectations, would confirm the largest FX intervention on record in JPY terms.
  • Today's spot weakness keeps pressure on the JPY TWI - which is holding close to one-month lows and is ~1.2% above pre-intervention levels. Despite the close proximity to this key level, JPY vols are largely subdued across the front-end of the curve, which is feeding further into carry trade dynamics - keeping JPY under further pressure.
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