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USD/JPY Opens 1% Gap With Cycle Highs

FOREX
  • Comments from Bank of Japan governor Ueda have been the focus for the Monday session so far, after Ueda was cited in the Yomiuri newspaper as saying that it's possible the Bank of Japan will have enough data and information by the end of 2023 to confirm the trajectory of wages into next year, thereby helping the council come to a decision on whether to exit negative interest rate policy.
  • The JPY rallied in response, tipping USD/JPY back below the Y146.50 mark to open a 1% gap with the cycle high printed last week at Y147.87. This keeps the JPY as the strongest performing currency headed into the NY crossover.
  • The greenback is the poorest performer so far, as the roll off overnight highs for the US 10y yield keeps the USD in check. Despite the pullback in spot, prices remain inside the well-defined uptrend channel drawn off the mid-July lows, keeping the medium-term outlook bullish for the USD Index.
  • The strength across Chinese currencies have also been a factor in the poor USD performance: USD/CNH sits just above session lows, last around 7.3000 and tracking lower thanks to a stronger than expected CNY fix. The PBOC stated it has confidence in maintaining a stable yuan, and source reports suggest that dollar bulk buying will now have to be pre-approved by the central, with $50mln the reported limit. Better than expected August lending figures have also aided onshore equities after the break.
  • Data points are few and far between, with the speakers slate also quiet as both the ECB and Fed are within their pre-decision media blackout periods. The NY Fed inflation expectations release takes focus ahead, last seen at +3.55% for July.
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