U.S. Tsy Yields Drag USD/JPY Higher, Kuroda To Address BoJ Branch Managers

U.S. Tsy yields pushed higher on Wednesday, driving USD/JPY higher after its initial dip. Fragile risk sentiment lent support to safer currencies.

• Continued flow of hawkish Fedspeak and slightly better than expected U.S. economic data applied cheapening pressure to U.S. Tsys, promoting the widening of yield differentials with Japan. The spread on 2-year yields grew 6.0bp; 10-year gap widened 9.0bp, returning above 350bp.
• Equity benchmarks across Europe and the U.S. were in the red come the end of play, albeit the VIX index eased ~1.8%. The BBG Commodity Index rose 0.7% after OPEC+ recommended a touted output cut to the tune of 2bpd.
• The yen has been unfazed this morning by the news that North Korea test-launched two SRBMs off its east coast shortly after condemning the redeployment of a U.S. aircraft carrier to the area.
• Spot USD/JPY last seen at Y144.51, down 13 pips on the day. The Y145.00 figure marks the threshold of heightened intervention risk, with the next topside target provided by Sep 22 high/2.764 proj of the Aug 2 - 8 - 11 price swing at Y145.90/146.03. Bears look for a dip through Sep 22 low of Y140.36.
• BoJ Gov Kuroda will speak at the branch managers' meeting. Looking further afield, Japan's earnings/spending data will be published on Friday.