Yen Keeps Sliding Even As Warnings From Japanese Officials Grow Louder

Japanese authorities further ramped up their warnings on yen weakening, but to no avail. The currency tumbled, even as FinMin Suzuki said that officials were monitoring FX moves with a "strong sense of vigilance," as rapid depreciation has "strong negative aspects" given the current economic climate. His insistence that the exchange rate is decided by the market signalled apparent reluctance to intervene, possibly adding fuel to the selling pressure.

• Spot USD/JPY was in demand into the Tokyo fix and extended gains on the back of Suzuki's comments. The rate soared towards the Y128.00 mark, albeit this round figure remains intact when this is being typed. Implied USD/JPY volatilities surged across the curve, with 1-year tenor printing two-year highs.
• Monday's comments from Fed & BoJ policymakers served as a reminder of growing policy divergence, the main driver of USD/JPY rally over the recent weeks. BoJ Gov Kuroda reaffirmed his commitment to powerful easing, while Fed's Bullard said that a 75bp rate hike was an option.
• Bullard's remarks helped push the dollar index (DXY) to a fresh cycle high as expectations of aggressive tightening by the Fed continued to build. While St. Louis Fed Pres "wouldn't rule it out" that the FOMC could raise interest rates by 75bp, it was not "his base case."
• High-beta currencies were better bid on firmer crude oil prices & upticks in U.S. e-mini futures. Antipodean central bankers showed hawkish inclinations, as RBNZ Gov Orr reaffirmed his team's strong tightening bias, while RBA minutes said that faster inflation/wage growth "have brought forward the likely timing of the first increase in interest rates."
• U.S. housing starts/building permits take focus on the data front, while the central bank speaker slate features Riksbank's Floden & Fed's Evans.