USD/JPY Touches Fresh Highs, But Yen Outperforms On Crosses Amid Equity Weakness

Yen outperformed broader USD gains for Tuesday's session. While the pair was range bound post the Asia close, we still made fresh multi-month highs, just above 138.90. We sit slightly lower now, back at 138.55/60. Weaker equity sentiment in US/EU markets helped yen outperform on crosses, particularly against AUD and NZD.

• Debt negotiations continued to dominate the US session, with little headway in terms of meaningful progress, although talks are set to continue. This weighed on equity sentiment, with US and EU markets both off by around 1%. The VIX climbed to 18.5%, although finished below session highs.
• US yields were mixed, drifting lower at the back end, but holding firmer at the front end. Spreads with Japan have drifted a touch lower, but still around highs back to mid-March (+328bps for the 10yr nominal Treasury spread).
• Despite the highs in USD/JPY, 1 month risk reversals are well within recent ranges at -1.52, while implied 1 month vol is not far off May highs, last around 10.9%.
• On the data front today, Apr final machine tool orders is out, the prior outcome was -14.4% y/y.
• China also opposed Japan's export curb on chipmaking technology, which kicks in from July (see this link for more details).