USD/JPY Loses Ground, Implied Volatilities Falter

Spot USD/JPY oscillated in the vicinity of the Y145.00 mark through Tuesday's Asia & Europe hours, before pulling back from there over the WMR fix, yielding to pressure from broad-based greenback sales.

• Equity sentiment remained strong, despite hawkish comments from Fed members. Benchmark indices soared across the board, while the VIX closed below 30 for the first time in more than a week, which created a hostile environment for safe-haven currencies.
• U.S./Japan 2-year yield spread narrowed 1.3bp come the end of play, while 10-year differential widened 1.8bp.
• USD/JPY implied volatilties extended their decline on Tuesday, led by the front-end, with one-month tenor printing worst levels since Aug 19 and with one-week tenor hitting its lowest point since Jun 1.
• Spot USD/JPY last at Y144.10, with bears looking for a slide towards Sep 22 low of Y140.36. A move through Y145.00 would put participants on intervention watch, shifting technical focus to Sep 22 high/2.764 proj of the Aug 2 - 8 - 11 price swing at Y145.90/146.03.
• Jibun Bank Services/Composite PMIs are unlikely to move markets today, with spending/earnings data coming up Friday.
• BoJ Gov Kuroda will speak at the Branch Managers' meeting on Thursday.