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JPY: Yen Loses 2% Amid US Yield Surge, Sep Labor Earnings Out Today

JPY

USD/JPY sits near 154.65 in early Thursday dealings, having lost close to 2% in Wednesday trade. Late intra-session highs from Wednesday trade came in at 154.70, so close to current spot levels. Yen was the weakest performer in the G10 space (closely followed by EUR losses), as markets moved aggressively back into Trump related reflationary trades. 

  • For USD/JPY technicals, the trend needle continues to point north. A continuation higher would open 155.27, a Fibonacci projection. This level matches closely to the July 30 high of 155.22, a level traded one day prior to the BOJ hike and ensuing sharp move lower for USDJPY across early August. The 20-day EMA sits back at 150.93 on the downside.
  • US-JP yield differentials rose amid a bear steepening in the US yield curve, the 10yr spread back to early June levels. There is scope for some catch up from JGB yields, but local political consensus around further BoJ rate hikes is being pushed into 2025 rather than before year end.
  • A further sharp weakening in the yen may shift such risks but also raise intervention prospects.
  • Today locally we have Sep labor cash earnings, a key input into the BoJ outlook. The market looks for nominal earnings at 3.0%y/y, little changed from August. Real earnings are expected to rise back into positive territory (0.1%y/y from -0.8% prior).
  • In the option expiry space note the following for NY cut later: Y151.00($1.3bln), Y153.50($729mln).  

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