USD/JPY has shed 12 pips so far and......>

DOLLAR-YEN: USD/JPY has shed 12 pips so far and sits at Y106.96, as the

escalation of U.S.-China tensions over the last 24 hours or so remains front and

centre. The Nikkei 225 futures are pointing to a lower open.

- The yen benefited from yesterday's switch into the risk-off mode, inspired by

the mounting sources of tensions between the U.S. and China, in the direct

run-up to their bilateral talks. Despite edging higher initially as China

confirmed that its top off'l will attend Thursday's negotiations w/U.S.

counterparts, the rate sold off sharply into the London noon. Some fresh demand

for USD/JPY emerged into the WMR fix, but those gains were pared late doors amid

the previously documented developments in U.S.-China relations.

- The pair threatens to break below the 38.2% retracement of its Aug 26 - Sep 18

rally at Y106.94, which would open up the 50-DMA at Y106.89 and the Oct 3

low/50% retracement of that rally at Y106.48/47. Bulls look to recover the Oct 7

high of Y107.46, which would clear the way to the 100-DMA at Y107.61.

- Japanese focus turns to flash machine tool orders, due later today, as well as

PPI, core machine orders and a speech from BoJ Dep Gov Amamiya, due Thursday.