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Weaker Yen Not Expected To Prompt BoJ Action Today

JPY
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USD/JPY gains continued Thursday, the pair up nearly 0.20%. We couldn't get beyond the 155.75 region though and sit near 155.60 in early Friday dealings. There was some volatility through the US data releases, with dips sub 155.40 supported. Yen was the weakest performer in the G10 space for Thursday's session.

  • A softer USD tone against the other majors may have helped curb USD/JPY upside. Both the BBDXY and DXY finished down for Thursday. This came despite a decent rise in US yields, post the PCE beat (some offset came from weaker Q1 GDP).
  • US-JP yield differentials are skewed higher, albeit as we await the BoJ outcome today. The 10yr spread is around +380bps.
  • No major changes are expected from the BoJ today, despite some focus on the weaker yen and its impact on the inflation outlook. MNI understands that the USD/JPY at current levels is insufficient to prompt any immediate rate hike from the BoJ (per our Tokyo policy team).
  • Overnight JPY options vols are pricing a sizeable swing across the BoJ decision on Friday, with markets pricing options at their most sensitive level of the year so far.
  • Note the following in the option expiry space for NY cut later as well: Y155.00($1.1bln), Y156.50($531mln).
  • Levels wise for USD/JPY, upside focus is on 156.00, round figure resistance. 154.46 is the Apr 22 low.
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USD/JPY gains continued Thursday, the pair up nearly 0.20%. We couldn't get beyond the 155.75 region though and sit near 155.60 in early Friday dealings. There was some volatility through the US data releases, with dips sub 155.40 supported. Yen was the weakest performer in the G10 space for Thursday's session.

  • A softer USD tone against the other majors may have helped curb USD/JPY upside. Both the BBDXY and DXY finished down for Thursday. This came despite a decent rise in US yields, post the PCE beat (some offset came from weaker Q1 GDP).
  • US-JP yield differentials are skewed higher, albeit as we await the BoJ outcome today. The 10yr spread is around +380bps.
  • No major changes are expected from the BoJ today, despite some focus on the weaker yen and its impact on the inflation outlook. MNI understands that the USD/JPY at current levels is insufficient to prompt any immediate rate hike from the BoJ (per our Tokyo policy team).
  • Overnight JPY options vols are pricing a sizeable swing across the BoJ decision on Friday, with markets pricing options at their most sensitive level of the year so far.
  • Note the following in the option expiry space for NY cut later as well: Y155.00($1.1bln), Y156.50($531mln).
  • Levels wise for USD/JPY, upside focus is on 156.00, round figure resistance. 154.46 is the Apr 22 low.