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Loses Some Ground, But Most Of The Post BoJ Rally Remains Intact

JPY

USD/JPY spent most the post Asia close recovering further. Dips towards 131.50 remained supported, while we got to around 132.50 as we progressed through the US session. We aren't too far away from these highs currently, last near 132.40. There was a post BoJ rebound in the pair near 133.00, while the Dec 14 low at 134.54 should also act as resistance.

  • Broader risk appetite was firmer in the equity space, while commodities also rose across the major aggregate indices. This likely diminished yen appeal to a degree, although yesterday's session looked more like a consolidation after Tuesday's big rally.
  • USD/JPY still looks too low relative to US-JP yield differentials, but this wedge has been evident for some time and the market may be reluctant to close the gap as we move into next year, with some premium in the yen to potentially remain, given risks around the BoJ policy outlook.
  • The local data calendar has weekly investment flow data on tap, then the leading and coincident indices print later on.

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