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JPY: USD/JPY Surges Back To July Levels On BoJ/Fed Policy Divergence

JPY
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USD/JPY got to highs of 157.81 in Thursday trade, before moderating a touch as the US session unfolded. We sit back near 157.40 in early Friday dealings, still off 1.65% against the USD for Thursday's session, comfortably the worst G10 performer. 

  • Thursday's daily gains of near 300 pips for USD/JPY was akin to the rally posted on April 26th, which was followed just the next day by official BoJ intervention to slow the decline of the JPY. That seems unlikely at this juncture given the move was been triggered by fundamentals, rather than baseless speculation, with the Fed/BoJ confluence moving markets globally, and not just contained to Japan.
  • Governor Ueda stated the central bank is in no hurry to hike rates, but kept the door ajar for a Jan hike. OIS pricing per WIRP on BBG doesn't have a full 25bps hike priced into until June next year. Coupled with a steeped US Tsy curve on Thursday was another supporting factor for USD/JPY.  
  • Still, given USD/JPY is now back to levels last seen in July, we may see official rhetoric step up in support of the currency today and over coming sessions.
  • Tech wise for USD/JPY, upside focus will be on a series of July highs (157.89, 158.86 and 159.45). The 20-day EMA is back at 152.59 on the downside.
  • Today we get Nov national CPI. The market projections are for a firmer y/y pace across the headline and key core metrics.  
  • Option expiries of note are mostly clustered below current spot levels for NY cut later. With only Y158.00($596mln) above current levels. 
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USD/JPY got to highs of 157.81 in Thursday trade, before moderating a touch as the US session unfolded. We sit back near 157.40 in early Friday dealings, still off 1.65% against the USD for Thursday's session, comfortably the worst G10 performer. 

  • Thursday's daily gains of near 300 pips for USD/JPY was akin to the rally posted on April 26th, which was followed just the next day by official BoJ intervention to slow the decline of the JPY. That seems unlikely at this juncture given the move was been triggered by fundamentals, rather than baseless speculation, with the Fed/BoJ confluence moving markets globally, and not just contained to Japan.
  • Governor Ueda stated the central bank is in no hurry to hike rates, but kept the door ajar for a Jan hike. OIS pricing per WIRP on BBG doesn't have a full 25bps hike priced into until June next year. Coupled with a steeped US Tsy curve on Thursday was another supporting factor for USD/JPY.  
  • Still, given USD/JPY is now back to levels last seen in July, we may see official rhetoric step up in support of the currency today and over coming sessions.
  • Tech wise for USD/JPY, upside focus will be on a series of July highs (157.89, 158.86 and 159.45). The 20-day EMA is back at 152.59 on the downside.
  • Today we get Nov national CPI. The market projections are for a firmer y/y pace across the headline and key core metrics.  
  • Option expiries of note are mostly clustered below current spot levels for NY cut later. With only Y158.00($596mln) above current levels.