USD/JPY Dips Supported, Yen Underperforms Risk On Rally

USD/JPY sits near 154.80 in recent dealings, similar to levels that prevailed late in Asia Pac trade on Tuesday. We were little changed for Tuesday's session as whole, albeit with some bouts of volatility through US trade. We saw a couple of dips sub 154.60, but both were short lived.

• The first move lower reflected weaker than expected US PMI data, which hurt dollar sentiment across the board. The second came post a Nikkei article, which suggested the BoJ will discuss the weaker yen's impact on domestic inflation (see this link for more details).
• Yen underperformed the broader USD sell-off (along with CHF) for Tuesday trade, as risk appetite improved further. US equities rose +1.2% for the SPX, while EU equities were stronger across the board.
• The softer US yield backdrop, post the weaker PMIs, with 2yr off 4bps to 4.93% (although losses were more modest at the back end), aided broader risk appetite. Yen lost around 0.80% versus GBP, and 0.60% against AUD.
• On the data front today we have the March PPI services print (2.1% y/y is projected). Intervention risks will again be a focus point, with a former top currency official stating the country is 'very close' to intervention, see this BBG link. A business group head also stated yen weakness has gone too far against the USD (see this link).
• In the FX option expiry space note the following for NY cut later: Y153.50($1.4bln), Y154.00($652mln), Y154.10-25($827mln), Y155.40($1.1bln).