JPY: Yen Outperforms Amid Oil Slump/Lower Yields, BoJ Speech On Tap Today

Yen was the best G10 performer in Tuesday trade, rallying just over 0.50%. USD/JPY tracks near 142.40/45 in early Wednesday dealings. This was an impressive turn around after the pair was as high as 143.71 late in Tuesday Asia Pac trade. Recent lows sub 142.00 remain intact though. USD indices finished Tuesday US trade a touch higher (BBDXY up 0.11% to 1236.44) ahead of key event risks (US Presidential debate and CPI later). 

• The yen benefited from a sharp slump in crude prices (-4.31% for WTI), amid on-going demand concerns/supply overhang. This helped press US yields lower, led by the front end (2yr off 7.5bps to sub 3.60%). Such a backdrop keeps US-JP yield differentials firmly skewed to the downside, with the 2yr and 10yr differentials back towards levels last seen in August 2022.  
• US equity markets were higher for SPX and the Nasdaq, although financials weakness was a broader risk concern. AUD/JPY tracked lower, getting to lows around 94.50, before some support emerged.
• For USD/JPY techs, bears remain in the drivers seat. Focus remains on the August 5 low at 141.70. ahead of the US Presidential debate this morning APAC time and then the US inflation print later in the Wednesday US session.
• The local data calendar is quiet today, but we do have BoJ Board Member Tamura speaking in Okayama. Our Tokyo based policy team also put out the following piece late yesterday local Japan time, MNI POLICY: BOJ Examines Upping Pace Of Hikes (see this link).