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Yen Lags On Crosses As Risk Appetite Remains Firm

JPY

USD/JPY drifted higher through Wednesday's session we got near 132.90 post the Asia close before selling interest emerged. We sit at 132.40/45 currently. The generally positive risk-on tone in the equity/commodity space is likely weighing on yen weakness from a cross standpoint.

  • Core yields were mostly lower through Wednesday's session, with US cash Tsy yields down over 8bps at the back end of the curve. The US-JP 10yr spread is not too far off multi month lows, although as we noted yesterday the correlation with JPY moves hasn't been that strong YTD.
  • Market focus may also be shifting to next week's BoJ meeting (Jan 18th). 1 week implied USD/JPY vol is now near 18%, above Dec highs. 1 month implieds are more benign, last around 14%, but still elevated relative to 2022 averages.
  • On the data front today, trade and BoP data for Nov prints, along with Dec bank lending. Later on, the Dec Eco Watchers Survey is due, which is expected to be softer (47.7 forecast versus 48.1 prior).
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