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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
JPY
The yen weakened past Y150 against the greenback for the first time since August 1990, moving along the path of least resistance determined by familiar fundamental forces. Intervention chatter was rife as another key psychological threshold gave way.
- Hawkish Fedspeak continued to do the rounds and the terminal fed funds rate pricing toped 5% for the first time this cycle. This exerted upward pressure on U.S. yields, driving a bigger wedge with Japan. The spread on 2-year yields widened by 4.4bp, while 10-year gap expanded 9.7bp, with both touching multi-year wides. Meanwhile, the BoJ defended its YCC target via unscheduled bond-purchase operations.
- Japan's top FX diplomat ramped up his rhetoric, noting that excessive moves in currency markets are becoming even more intolerable, while resources for intervention are limitless. Still, officials stopped short of clarifying whether they stepped in, albeit they had earlier signalled that stealth interventions are on the table.
- Implied volatilities were trending higher, with 1-year tenor lodging new cyclical highs.
- Spot USD/JPY last sits at Y150.12, barely changed on the day. The next topside target is the 3.618 proj of the Aug 2 - 8 - 11 price swing at Y150.45. Bears look for a pullback towards Oct 5 low of Y143.53.
- Japan's inflation data will cross the wires today, with the confluence of reliance on imported goods and rapid currency depreciation expected to fuel price growth. Core CPI may have accelerated to +3.0% Y/Y, according to a Bloomberg survey.
Fig. 1: USD/JPY 1-Week/1-Year Implied Volatility
Source: MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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