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USD/JPY Holding Above 151.00, EUR/JPY To Fresh Highs Back To 2008

JPY

USD/JPY sits off session highs, tracking close to 151.15. Earlier we got to 151.34, fresh highs back to mid Nov last year. Upside focus is likely on Nov highs from last year at 151.91.

  • We haven't heard any push back from Japan officials so far, although it is a local holiday for onshore markets today.
  • US-JP yield differentials have steadied around recent highs, the 10yr spread around +355bps, the 2yr spread at +450bps. There is no cash Tsy or JGB trading today though, given onshore markets are closed. This may see the pair consolidate somewhat as the FOMC comes into view.
  • Still yesterday saw USD/JPY options volumes dominated, with around 33% of total volumes (per DTCC). Note the 1 month USD/JPY risk reversal surged through yesterday's session, last near -0.70, against recent lows of -2.00.
  • We aren't too far off recent cyclical highs above -0.50 for the 1 month risk reversal. 1 month implied vols have edged higher after touching sub 7%, which was fresh lows back to Nov last year (last near 7.42%).
  • EUR/JPY hit fresh highs back to 2008 on this morning's move higher (164.35), before edging slightly lower, last near 164.25.
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