USD/JPY Rebounds With US Yields

USD/JPY got to fresh lows in NY trade near 131.70, before rebounding sharply (+200pips) into close to be back within the 133.60/70 region. The pair currently sits around these levels in the first part of trade today. Yen followed US yield gyrations closely, with the trough in USD/JPY coinciding with lows in yields.

• Despite these moves, USD/JPY implied vols sit below recent highs, 1 week just under 16% ( versus recent highs above 20%), 1 month back to 12.85% (versus recent highs above 15%). Lower equity vol in the US has likely spilled over and contributed to these moves.
• The 1 month risk reversal sits slightly above recent lows, last around -1.81.
• Locally, the domestic data calendar has the tertiary industry index for Jan due later today. The market expects a 0.5% rise, versus -0.4% prior.
• Japan will lift export curbs on key chip materials from South Korea in a sign of improving relations between the two countries. This comes after yesterday's leaders' summit between South Korean President Yoon and Japan Prime Minister Kishida.
• Finally, a major Japan union won a 2.95% base pay rise, which was announced late yesterday. This was the largest since 2013, see this Bloomberg link for more details.