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JPY: USD/JPY Tracks US Yields Lower, Ex-BoJ Official Notes Yen Key To Rates

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USD/JPY's near term fortunes remain tied to short end US Tsy yield shifts. Yen gained around 0.50% for Thursday's session, the best performing G10 currency (albeit slightly shading NZD). The pair tracks near 148.60 in early Friday dealings. We got just above 149.50 on the US CPI beat but quickly retraced lower more than 100pips. The US 2yr Tsy yield fell from intra-session highs of 4.09% to finish up at 3.96%. The chart below plots USD/JPY against the US 2yr yield shifts. 

  •  The US CPI print was offset by the spike in initial jobless claims, although some of this rise may have reflected the impact of Hurricane Helene. Fed speak was also mixed, with Goolsbee in total agreement with Chairman Powell, while Atl Fed Bostic could see a pause in November.
  • After rallying more than 50bps from recent lows some consolidation in the US 2yr yield is arguably not surprising. For USD/JPY, its fortunes remain tied closely to the US rate/Fed outlook.
  • Comments from BoJ Deputy Governor Himino late yesterday were consistent with recent BoJ rhetoric around further policy adjustments if the outlook meets projections (per BBG). Former BoJ official Momma stated rate hikes could come back into play if USD/JPY breaches 150.00 (also per BBG). The July hike from the central bank was in part in response to the weaker yen trend in the first half of the year.
  • Today on the data front we have Sep money stock figures. Note in the option expiry space the following for NY cut later: Y149.00($521mln), Y149.50($903mln), Y149.80-00($1.5bln).
  • For USD/JPY technicals, 149.55 is yesterday's high, while 145.65 is the 20-day EMA on the downside. 

Fig 1: USD/JPY & US 2yr Tsy Yield Moving In Sync 

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USD/JPY's near term fortunes remain tied to short end US Tsy yield shifts. Yen gained around 0.50% for Thursday's session, the best performing G10 currency (albeit slightly shading NZD). The pair tracks near 148.60 in early Friday dealings. We got just above 149.50 on the US CPI beat but quickly retraced lower more than 100pips. The US 2yr Tsy yield fell from intra-session highs of 4.09% to finish up at 3.96%. The chart below plots USD/JPY against the US 2yr yield shifts. 

  •  The US CPI print was offset by the spike in initial jobless claims, although some of this rise may have reflected the impact of Hurricane Helene. Fed speak was also mixed, with Goolsbee in total agreement with Chairman Powell, while Atl Fed Bostic could see a pause in November.
  • After rallying more than 50bps from recent lows some consolidation in the US 2yr yield is arguably not surprising. For USD/JPY, its fortunes remain tied closely to the US rate/Fed outlook.
  • Comments from BoJ Deputy Governor Himino late yesterday were consistent with recent BoJ rhetoric around further policy adjustments if the outlook meets projections (per BBG). Former BoJ official Momma stated rate hikes could come back into play if USD/JPY breaches 150.00 (also per BBG). The July hike from the central bank was in part in response to the weaker yen trend in the first half of the year.
  • Today on the data front we have Sep money stock figures. Note in the option expiry space the following for NY cut later: Y149.00($521mln), Y149.50($903mln), Y149.80-00($1.5bln).
  • For USD/JPY technicals, 149.55 is yesterday's high, while 145.65 is the 20-day EMA on the downside. 

Fig 1: USD/JPY & US 2yr Tsy Yield Moving In Sync 

Keep reading...Show less