USD/JPY Volatile Through FOMC But Ends Lower On US Yield Dip & Weaker Equities

Yen outperformed the rest of the G10, up nearly 0.50% against the USD for Wednesday's session. We were sharply lower, hitting 146.01, until support emerged. We rebounded back to 147.40/45, as Fed Chair Powell set a high bar for a March rate cut. We track just under 147.00 in early Thursday trade. Note the BBDXY was around 0.20% higher for Wednesday's session.

• Wednesday session trading in the US was dominated by the FOMC. US yields were volatile but ultimately ended lower (-12bps for the 2yr, the 10yr -10bps to 3.92%). This helped the yen, with USD/JPY generally following the intra-session gyrations of US yields.
• The US-JP 10yr yield differential is threatening to break sub late 2023 lows, although there should be some catch up to the downside from JGBs today. Still, USD/JPY looks as if it has some room to catch up on the downside with these trends.
• The sharp pull back in US equity sentiment likely aided the yen as well, particularly on a cross basis. Higher beta plays NOK, AUD and NZD were the weakest G10 performers.
• Today, we have weekly investment flow figures and the final PMI print for Jan.
• USD/JPY, the low 146.00 region may act as a support point, also note 145.59, which is the Jan 16 low. On the topside, 148.80 is the Jan 19 high.
• In the option expiry space note the following for expiry later in NY: 146.00 (431mln), 146.50 (333mln), 147.00 (200mln).