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USD Gains, JPY Tumbles On BoJ Policy Divergence

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EquitiesBulletMarketsFixed IncomeForeign Exchange

The greenback has benefitted from an uptick in U.S. Tsy yields and JPY weakness during Asia-Pac dealing, trading higher against most of its G10 FX counterparts as a result.

  • JPY has tumbled to the bottom of the same rankings on the back of the latest enforcement attempts re: the top end of the BoJ’s permitted 10-Year JGB yield trading band, as USD/JPY surged to fresh multi-year highs on continued BoJ policy divergence vs. DM central bank peers, printing as high as Y123.16, before easing back to trade around Y123.00. Note that 10-Year JGB yields have had an incremental look above the upper limit of the BoJ’s permitted trading band, resulting in a second round of BoJ buying interest via fixed rate operations after the initial fixed rate operations drew no offers to sell from market participants.
  • Elsewhere, there is a bit of defensive tone, with a downtick in oil markets & pressure on Chinese mainland equities amid a two-stage lockdown in the Chinese city of Shanghai garnering most of the attention on the headline front.
  • The likes of the NOK & CAD are struggling with lower oil prices, although the AUD is the top performer within the G10 sphere, benefitting from commodity FX cross- & AUD/JPY related flows, with AUD/NZD moving to the highest level observed since April ’21. Note that the ruling Australian coalition will cut the fuel excise duty and support first time buyers re: the housing market when it hands down the latest Federal Budget on Tuesday.
  • Looking ahead, Monday’s focus will fall on central bank speak from ECB’s Rehn & BoE Governor Bailey, with lower tier economic data due from across the globe. Elsewhere, the latest Russia-Ukraine summit in Turkey will garner interest, although there is little in the way of expectations re: a meaningful breakthrough between the two nations.
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The greenback has benefitted from an uptick in U.S. Tsy yields and JPY weakness during Asia-Pac dealing, trading higher against most of its G10 FX counterparts as a result.

  • JPY has tumbled to the bottom of the same rankings on the back of the latest enforcement attempts re: the top end of the BoJ’s permitted 10-Year JGB yield trading band, as USD/JPY surged to fresh multi-year highs on continued BoJ policy divergence vs. DM central bank peers, printing as high as Y123.16, before easing back to trade around Y123.00. Note that 10-Year JGB yields have had an incremental look above the upper limit of the BoJ’s permitted trading band, resulting in a second round of BoJ buying interest via fixed rate operations after the initial fixed rate operations drew no offers to sell from market participants.
  • Elsewhere, there is a bit of defensive tone, with a downtick in oil markets & pressure on Chinese mainland equities amid a two-stage lockdown in the Chinese city of Shanghai garnering most of the attention on the headline front.
  • The likes of the NOK & CAD are struggling with lower oil prices, although the AUD is the top performer within the G10 sphere, benefitting from commodity FX cross- & AUD/JPY related flows, with AUD/NZD moving to the highest level observed since April ’21. Note that the ruling Australian coalition will cut the fuel excise duty and support first time buyers re: the housing market when it hands down the latest Federal Budget on Tuesday.
  • Looking ahead, Monday’s focus will fall on central bank speak from ECB’s Rehn & BoE Governor Bailey, with lower tier economic data due from across the globe. Elsewhere, the latest Russia-Ukraine summit in Turkey will garner interest, although there is little in the way of expectations re: a meaningful breakthrough between the two nations.