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Y137.00 Comes Under Attack

JPY

USD/JPY touched Y137.00 for the first time in 24 years on Wednesday but struggled to rip through that level. Broader demand for the greenback, fuelled by hawkish Fedspeak, drove the pair higher, with month-end flows providing another usual suspect.

  • U.S. Tsy purchases in NY hours prompted U.S./Japan 10-Year yield spread to narrow on Wednesday, but spot USD/JPY was defiant and crept higher nonetheless.
  • USD/JPY 1-month risk reversal extended its recovery as the spot rate moved higher, but it still remains comfortably below par.
  • Spot USD/JPY last seen at Y136.56, little changed on the day. A clearance of Jun 29 high of Y137.00 would open up the 1.50 proj of the Feb 24 - Mar 28 - 31 price swing at Y137.30. Conversely, bears initially look for a dip towards Jun 23 low of Y134.27.
  • PM Kishida took part in a trilateral meeting with South Korean Pres Yoon & U.S. Pres Biden Wednesday but is not planning any direct official talks with South Korean leader. Sankei ran a source report noting that Tokyo remains dissatisfied with Seoul's stance on key points of contention.
  • Japanese data highlights during the remainder of the week include flash industrial output (today) as well as Tankan Survey, unemployment & Tokyo CPI (Friday).
  • Note that the BoJ will outline its quarterly bond purchase plan today. It may come under increased scrutiny in light of the Bank's recent tug-of-war with the market, when the benchmark 10-Year yield tested the upper end of its permitted trading band.
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