Yen Claws Back Losses In Aggressive Surge, Then Returns To Neutral

Aggressive selling took USD/JPY into negative territory, with the yen briefly topping the G10 pile. The sharp nature of the move raised speculation over the potential for another intervention to prop up the yen, after officials stepped in on Friday. Some of the losses have been quickly unwound, taking the pair back towards neutral levels.

• MoF top brass spoke just ahead of the yen's about-face, reiterating strong concern with excessive volatility in the FX markets. FinMin Suzuki said he wouldn't comment on whether Japan intervened last Friday (despite source reports noting as much), and declined to comment on why he wasn't commenting. Chief FX diplomat Kanda said data on FX interventions will be published at the end of the month, adding that officials are monitoring currency markets and can act in a 24h cycle, every day of the year.
• Spot USD/JPY dropped ~2.8% from peak to trough. Initial buying interest took it to the session high of Y149.71, before the sharp fall to the session low of Y145.56. By comparison, the top-to-bottom slump on Friday was ~3.8%. When this is being typed, the rate deals +12 pips at Y147.80 and remains volatile.
• USD/JPY overnight implied volatility shot to 27.5%, the highest point since Sep 21.
• Bloomberg trader sources said the initial upswing in USD/JPY was caused by "fast-money funds taking back short spot positions, some of whom assumed their buy orders on Friday were filled, only to be told they weren't." There is reportedly a debate among traders about the level that triggered an intervention last Friday.