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USD/JPY Holds Near 149.00 On Yield Differential Support, Intervention Risks In Focus

JPY

USD/JPY continued to climb post the Asia close on Monday. We got close to 149.00, but couldn't break above this figure level. Dips back towards the 148.70 level were supported and we currently track around the 148.85 region. Yen lost 0.34% for Monday's broadly in line with the BBDXY gain of 0.37% for the session.

  • The bear steepening in the US curve saw the 10yr swap rate rise 10bps to 4.20%. Without a strong reaction from Japan swap rates today, the US-JP 10yr swap rate differential will be at fresh cyclical highs near +330bps. Levels correlations between this spread and USD/JPY are back to +80% for the past month.
  • Such a backdrop keeps the focus firmly on USD/JPY upside, with the main worry for the market likely to be intervention risks. Market participants will be wary of any comments from the MoF as we make headway towards 150.00, a point of reference for some sell-side institutions regarding the potential for intervention.
  • Ueda spoke late yesterday and said it is important for foreign exchange rates to move stably reflecting economic and financial fundamentals. Still, he didn't suggest a near term shift in the BoJ's policy bias.
  • The data calendar has August PPI services on tap today.
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