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Yen Finds Poise Thursday As U.S./Japan Yield Spread Shrinks, Tokyo CPI Eyed

JPY

The yen was the main G10 gainer on Thursday as U.S./Japan 10-Year yield gap narrowed 7bp amid good demand for U.S. Tsys.

  • Data released out of the U.S. supported this dynamic as core PCE & personal spending came in slightly below expectations.
  • Suspected profit-taking ahead of month-end rebalancing may have amplified pressure to the greenback.
  • Meanwhile, risk aversion favoured the yen, with major equity benchmarks trading in the red & the VIX index crept higher.
  • A drop in crude prices provided another tailwind for the yen, owing to Japan's status as a net importer of oil.
  • USD/JPY 1-month risk reversal snapped a two-day advance on Thursday. It remains comfortably below par since mid-June.
  • Spot USD/JPY last changes hands at Y135.80, up 8 pips on the day, with bulls looking to a rally towards its recent cyclical high/round figure of Y137.00. Bears keep an eye on Jun 28/23 lows of Y135.11/134.27.
  • Tokyo core CPI is due shortly, consensus looks for an acceleration to +2.1% Y/Y from +1.9% prior. Japan's jobs data & Tankan Survey are also due
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