JPY Volatility In Focus Amid Intervention Talk, GBP Firms On Reduced Political Uncertainty

The yen was volatile in early trade, climbing to Y149.71 only to post a sharp drop from there. The peak-to-trough rout was about 2.8%, less than Friday's ~3.8% high-to-low slide. The sudden retreat from session highs inspired speculation that MoF officials may have conducted an intervention for the second consecutive session. Recovery proved short-lived as the yen snapped back, with USD/JPY returning into positive territory, to last trade +85 pips at Y148.51.

• MoF top brass spoke just ahead of the yen's rebound, reiterating strong concern with excessive volatility in the FX markets. FinMin Suzuki said he wouldn't comment on whether Japan intervened last Friday (despite source reports noting as much), and declined to comment on why he wasn't commenting. Chief FX diplomat Kanda said data on FX interventions will be published at the end of the month, adding that officials are monitoring currency markets and can act in a 24h cycle, every day of the year.
• USD/JPY implied volatilities have soared across the maturity curve. Overnight vol sits at 17.0% after lodging best levels since mid-Sep, while 1-week tenor is at 21.6%, closing on the 21.8% multi-year peak. Further out the curve, implied vols are printing/sitting near cyclical highs.
• Sterling outperforms as the weekend brought some clarity on the Tory leadership contest. Former Chancellor Rishi Sunak has emerged as the frontrunner to replace Liz Truss as the UK's Prime Minister this week after former Premier Boris Johnson pulled out of the leadership race.
• The Aussie came under some pressure as RBA Asst Gov Kent played down concerns over the impact of a weaker exchange rate on domestic price pressures, noting that the TWI "typically has a greater bearing on our imported inflation than any one bilateral rate."
• Several financial centres across the region are closed for public holidays, including New Zealand, India, Malaysia and Thailand.
• PMI readings from across the globe will be trickling through today. Comments are due from BoE's Ramsden, who will testify to parliament for his reappointment.