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Softer U.S. Tsy Yields Lend Support To Yen, Japan's CPI Data On Tap Today

JPY

A decline in U.S. Tsy yields drove USD/JPY lower on Thursday, despite solid performance from the main U.S. equity indices. The yen was among the main G10 gainers.

  • Speaking after the BoJ decided to keep its ultra-loose monetary policy settings unchanged, Governor Kuroda emphasised that policymakers have "zero intention" of changing tack despite the weakening exchange rate. The yen came under pressure after his comments, but easily clawed back losses thereafter.
  • U.S. Tsys were rattled by domestic data releases which fuelled recessionary fears. Philly Fed business survey came in particularly weak, while weekly initial jobless claims unexpectedly ticked higher.
  • U.S./Japan 10-Year yield gap tightened to ~264bp, its narrowest level in two weeks. The spread is now ~59bp off its Jun 14 cyclical peak.
  • Meanwhile, USD/JPY 1-month risk reversal climbed to its highest point since Jun 13, the day when it last returned into negative territory.
  • Spot USD/JPY last trades at Y137.46, up 9 pips on the day, with bulls looking to a swing past Jul 14 high of Y139.39 before setting their sights on the psychological Y140.00 figure. Bears look for a dip through the 20-EMA at Y136.80, which would bring the key Jun 23 low of Y134.27 into view.
  • CPI data today is expected to show that core inflation quickened to +2.2% Y/Y in June from +2.1% prior. While the BoJ's target is +2.0%, the Bank deems current price pressures to be driven by supply-side factors rather than the underlying strength of the economy.
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A decline in U.S. Tsy yields drove USD/JPY lower on Thursday, despite solid performance from the main U.S. equity indices. The yen was among the main G10 gainers.

  • Speaking after the BoJ decided to keep its ultra-loose monetary policy settings unchanged, Governor Kuroda emphasised that policymakers have "zero intention" of changing tack despite the weakening exchange rate. The yen came under pressure after his comments, but easily clawed back losses thereafter.
  • U.S. Tsys were rattled by domestic data releases which fuelled recessionary fears. Philly Fed business survey came in particularly weak, while weekly initial jobless claims unexpectedly ticked higher.
  • U.S./Japan 10-Year yield gap tightened to ~264bp, its narrowest level in two weeks. The spread is now ~59bp off its Jun 14 cyclical peak.
  • Meanwhile, USD/JPY 1-month risk reversal climbed to its highest point since Jun 13, the day when it last returned into negative territory.
  • Spot USD/JPY last trades at Y137.46, up 9 pips on the day, with bulls looking to a swing past Jul 14 high of Y139.39 before setting their sights on the psychological Y140.00 figure. Bears look for a dip through the 20-EMA at Y136.80, which would bring the key Jun 23 low of Y134.27 into view.
  • CPI data today is expected to show that core inflation quickened to +2.2% Y/Y in June from +2.1% prior. While the BoJ's target is +2.0%, the Bank deems current price pressures to be driven by supply-side factors rather than the underlying strength of the economy.