Yen Goes Offered On Japan's Surprise GDP Contraction, Uptick In U.S. Tsy Yields

The yen was the worst G10 performer after preliminary data showed a surprise contraction in the Japanese economy, with higher U.S. Tsy yields adding pressure to Asia's main safe haven currency. Gotobi Day flows may have exacerbated JPY weakness.

• Japan's economy shrank 1.2% Y/Y in Q3 versus expectations of a 1.2% growth, according to preliminary data from the Cabinet Office, as the historic yen sell-off sent import costs soaring. The yen was unfazed in the first minutes after the release, but weakened gradually as the session progressed.
• U.S. Tsy yields sit 0.6-1.5bp higher at typing, with 10-year U.S./Japan yield spread 1bp wider as a result. Expectations of continued tightening from the Fed stands in contrast with the BoJ's ultra-dovish resolve.
• Offshore yuan showed a limited reaction to a slew of China's economic activity indicators, which were broadly weaker than forecast. CNY fixing bias was closed to neutral today, with the reference rate set just shy of the expected level.
• The kiwi dollar caught a bid on the back of better risk sentiment, with U.S. e-minis and Chinese/HK benchmarks tracking higher. AUD/NZD traded on a heavier footing, ignoring a round trip in Australia/New Zealand 2-year swap spread.
• There's a wealth of economic data coming up after Asia hours, including flash EZ GDP, German ZEW Survey, UK unemployment, Swedish CPI, as well as U.S. Empire M'fing & PPI. Comments are due from Fed's Barr, Cook & Harker, ECB's Villeroy & Elderson, as well as Riksbank's Floden.