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USDJPY Price Extremes Prompt Volatility/Intervention Speculation

  • Overall, G10 ranges have remained broadly contained on Monday as markets prepare for tomorrow’s key US CPI release. Slightly lower US yields and a mid-session pullback for USDJPY tilts the USD index into moderate negative territory as we approach the APAC crossover.
  • The Japanese Yen was the key focal point for currencies on Monday, with USDJPY spending the majority of the session inching towards the 2022 highs at 151.95. Trading within 4 pips of the level, the pair saw a rapid pullback during US hours, printing a session low of 151.21 in just a few minutes. Intervention speculation occurred but there is no evidence to back this up.
  • Today's volume spike on the move was actually considerably smaller relative to similar spikes in JPY on Oct26 (~10k contracts) and Oct17 (just over 20k contracts). As a reminder the BOJ confirmed at the end of October that no FX intervention had taken place across the month-ending Oct27 in its official FX reserves data (next released on Nov30), so today's smaller move likely more of the same.
  • Elsewhere, more risk sensitive currencies have outperformed on Monday with AUD and GBP rising just over 0.35%. The moves have been underpinned by major equity benchmarks consolidating the impressive recovery late Friday, providing a stable risk sentiment backdrop.
  • The greenback will eagerly await the US inflation report tomorrow. Consensus puts US core CPI inflation at 0.3% M/M in October. Our survey of analysts to 2.d.p suggests some mild upside skew for the result.

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