Weakens To Near 151.00 Post BoJ/Firmer Equity Backdrop, Onshore Markets Closed Today

The USD/JPY rally extended post the Asia close on Tuesday, the pair getting close to 151.00 in NY trade. We sit near 150.80 in the first part of Wednesday Asia Pac dealings, having lost 1.15% yesterday, comfortably the worst performer in the G10 space.

• Yen's weakness on Tuesday saw it pierce the 150.89 level, which was mentioned a number of times yesterday. This was the Feb 13 high and is seen as the bull trigger for the pair. A clear break above this level would clear the path for a test on last November's highs at 151.91 a little further out - and levels that will likely re-ignite intervention speculation from the Japanese authorities. Note the 50-day EMA sits back at 148.41 on the downside.
• With yesterday's rate hike well telegraphed, yen weakness appeared to reflect the BoJ's commitment to containing any spillover to local bond markets (via continued purchases) and the sense this is unlikely to be the start of an aggressive tightening cycle.
• The generally positive equity market backdrop for EU/US also helped yen crosses push higher. Our London team also stated - we note the downside pressure on the front-end of the USD/JPY vol curve - highly correlated with JPY downside: USD/JPY 3m implied vols are now through the YTD lows to print levels last seen in March 2022.
• Local markets are shut today for a local holiday. In the option expiry space we have the following for NY cut later: 147.00-20 ($1.3bn), 149.00 ($915mn), 150.00 ($1.3bn), 150.50 ($1.3bn), 151.00 (500mn).