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Underperforms As US Yields Hold rebound, BoJ Minutes Out Today

JPY

Yen was the weakest G10 performer through Tuesday's session, losing 0.75% against the USD. This leaves USD/JPY in the 134.20/25 region at this stage. We did get as high as 134.90 in US trade, as sentiment was volatile post the US CPI print (which came in slightly above expectations for core and was a touch firmer in terms of the detail). The pair followed US yields lower into the close though.

  • The US 2yr yield got close to 4.40%, but finished the session around 4.25%, still around 45bps above Tuesday intra-day lows. The US-JP 10yr swap spread rose around 25bps through Tuesday's session, now back to +290bps, which isn't too far off recent highs.
  • The outright 10yr swap rate for Japan finished at 53bps, while the 10yr JGB yield spent some part of yesterday's session sub the 0.25% level (i.e. below the previous ceiling for the BoJ's YCC framework). Today, the BoJ minutes are on tap.
  • Local bank shares are likely to be the other focus point, after the Topix bank index lost a further 7% yesterday. There was some stability in US financial names for Tuesday's session, so this may impart some stability today.
  • From a technical standpoint, 134.22, the 50-day EMA may remain in focus. The 200-day sits at 134.10 as well. A clear break to the downside would strengthen a short-term bearish threat and exposes 131.31, a Fibonacci retracement point.
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