USD Firm Post-Fed, BoJ Dovishness & Intervention Risk Generate JPY Volatility

The greenback advanced on regional reaction to the 75bp rate hike/reaffirmation of hawkish bias by the Fed, with risk assets staying under pressure. Cash Tsy curve bear flattened and e-mini futures softened as the BBDXY index climbed to a fresh all-time high of 1,329. The U.S. dollar outperformed all its G10 peers save for the Swiss franc as risk aversion lingered.

• The yen was volatile after the BoJ kept its ultra-loose monetary policy settings and dovish forward guidance unchanged. Spot USD/JPY took out the Y145.00 mark on its way to a new multi-decade high of Y145.37, which was followed by a sharp reversal. This raised questions on whether the sharp pullback was driven by an FX intervention or profit taking. The risk of an intervention has been heightened since Japanese authorities conducted a rate check last week.
• Risk-off flows and a spillover from yuan weakness applied pressure to the Antipodeans, which sit at the bottom of the G10 pile. AUD/USD fell through the $0.6600 figure, while NZD/USD approached $0.5800, with both lodging fresh cyclical lows.
• Spot USD/CNH showed above CNH7.1 even as the PBOC extended its run of stronger-than-expected yuan fixings to a record, while today's strengthening bias (fixing vs. sell-side estimate) also broke a record.
• Regional liquidity is thinner towards the end of the week. Financial markets in Australia were closed for a national day of mourning to mark the death of Queen Elizabeth II. Japan is set to observe a public holiday tomorrow.
• A marathon of central bank meetings takes centre stage today. Data highlights include U.S. current account balance & jobless claims, while the speaker slate features ECB's Schnabel, BoE's Tenreyro, as well as Riksbank's Floden & Ohlsson.