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Tuesday Morning Sees Yen Regain Poise After Sell-Off, BoJ Minutes On Tap

JPY

Spot USD/JPY eked out some gains Monday, trimming last week's decline, amid little demand for safe haven currencies. The rate has slipped this morning and last sits at Y136.44, down 25 pips on the day, as U.S. e-mini contracts falter.

  • U.S./Japan 10-year yield gap widened ~6.5bp on Monday, which underpinned spot USD/JPY. The yield on 10-year JGBs fell to a four-month low, with recession fears reducing expectations of BoJ policy normalisation anytime soon.
  • Despite the upswing in spot USD/JPY on Monday, USD/JPY 1-month risk reversal fell to its lowest point since Jul 14 and continues to operate near these levels.
  • With spot USD/JPY trading at Y136.44, bears look for a dip through Jul 22 low of Y135.57 before targeting Jun 23 low of Y134.27. Bulls look for a rally towards Jul 14 high/round figure of Y139.39/140.00.
  • The Cabinet Office revised its economic projections on Monday and now expects CPI to rise +2.6% Y/Y in the current fiscal year, a considerable but expected upgrade from the +0.9% forecast in January. Growth outlook for FY2022 was slashed to +2.0% Y/Y from +3.2%.
  • Friday will bring a Japanese data splurge, with Tokyo CPI, unemployment, retail sales & flash industrial output all coming up.
  • We are also on the lookout for the records of recent BoJ meetings. The minutes from the June policy review will cross the wires today, with the summary of opinions from this month's meeting due Friday.
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Spot USD/JPY eked out some gains Monday, trimming last week's decline, amid little demand for safe haven currencies. The rate has slipped this morning and last sits at Y136.44, down 25 pips on the day, as U.S. e-mini contracts falter.

  • U.S./Japan 10-year yield gap widened ~6.5bp on Monday, which underpinned spot USD/JPY. The yield on 10-year JGBs fell to a four-month low, with recession fears reducing expectations of BoJ policy normalisation anytime soon.
  • Despite the upswing in spot USD/JPY on Monday, USD/JPY 1-month risk reversal fell to its lowest point since Jul 14 and continues to operate near these levels.
  • With spot USD/JPY trading at Y136.44, bears look for a dip through Jul 22 low of Y135.57 before targeting Jun 23 low of Y134.27. Bulls look for a rally towards Jul 14 high/round figure of Y139.39/140.00.
  • The Cabinet Office revised its economic projections on Monday and now expects CPI to rise +2.6% Y/Y in the current fiscal year, a considerable but expected upgrade from the +0.9% forecast in January. Growth outlook for FY2022 was slashed to +2.0% Y/Y from +3.2%.
  • Friday will bring a Japanese data splurge, with Tokyo CPI, unemployment, retail sales & flash industrial output all coming up.
  • We are also on the lookout for the records of recent BoJ meetings. The minutes from the June policy review will cross the wires today, with the summary of opinions from this month's meeting due Friday.