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Yen was the weakest performer through Tuesday's session within the G10. The pair is down around 0.50%, with USD/JPY sitting back above the 133.00 level (last 133.05/10). This puts us back above the 50-day EMA at 132.71. Volatility was high over the US CPI release, with the pair dipping back to 131.50 before rebounding. We touched a high a 133.32 late in NY trade, which is fresh highs back to early Jan of this year.
- A clean break above the 50-day EMA could leave the Jan 6 high of 134.77 in play.
- The yen continued to show its sensitivity to US yield momentum. Cash US Tsys finished higher across the board, led by the front end (2yr +9bps to 4.60%, 3yr +12bps to 4.32%), albeit in volatile trade around the CPI print.
- There was less movement in the back end but the US-JP 10yr swap spread sits at +264bps, continuing to point to higher USD/JPY levels, see the chart below.
- Locally, former MoF official Eisuke Sakakibara (so called "Mr Yen") stated the BoJ may rates by Q4 this year, and the yen may strengthen to 120. He stated Ueda, the new BoJ Governor, may be forced to act if the Japan economy shows signs of overheating.
- On the data front it is just the Dec tertiary industry index on tap today.
Fig 1: USD/JPY & US-JP 10yr Swap Spreads
Source: MNI - Market News/Bloomberg
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