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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
JPY
USD/JPY has drifted back to 155.75, to be slightly weaker in yen terms for the session. Earlier highs rest at 155.94, which came post unchanged BoJ bond buying ops, while FinMin Suzuki stated FX intervention should only be used on a limited basis.
- USD/JPY is still tracking lower for the week (we ended last Friday at 157.31), which is consistent with lower US-JP yield spreads over this period. 2yr spreads are back at +439bps, against recent highs around +463bps. The 10yr spread is back to +332bps.
- Arguably USD/JPY remains too high relative to such trends, particularly lower 10yr spreads, but such divergences have been evident in recent years.
Fig 1: USD/JPY Versus Yield Differentials
Source: MNI - Market News/Bloomberg
- The technical backdrop is still supportive though, as USD/JPY remains above key support points. The 50-day EMA is back around 154.75, while trend line support, drawn from the Dec 28 low, is around 154.15/20. 157.71, the May 29 high, is seen as key upside resistance.
- Implied vol markets are starting to move on a short term basis as next week's BoJ meeting comes into view. The chart below plots the 1 week implied vol and 1 week risk reversal for USD/JPY.
- We are seeing the typical price action that can come in ahead of BoJ meeting outcomes. We are away from 2024 extremes though for both metrics.
Fig 2: USD/JPY 1week Implied Vol & Risk Reversal
Source: MNI - Market News/Bloomberg
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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