Yen Outperforms Amid VIX Surge, BoJ On Tap Today

Yen outperformed in the G10 space post the Asia close on Thursday. From levels near 148.40, we dipped over 100pips lower, getting close to 147.30 in NY trade before support emerged. We pushed back towards 147.60 by the close, which is we currently track, but this was a yen gain of 0.51% for the session.

• The yen was a notable outperformer against CHF, which dipped 0.65%, after the SNB surprised the market with an on hold policy decision. The yen also defied the continued push higher in US yields, although this was more so at the back end, with the 2yr yield dipping 3bps to 5.14%.
• Broad based equity market losses also aided the yen, particularly on crosses. AUD/JPY fell 1% and is back to 94.60/65, versus recent highs above 96.00. The US VIX index surged to 17.5%, fresh highs in around a month.
• Japan PM Kishida also stated the authorities will take action if yen moves are excessive, echoing recent official comments. The comments were given in a speech in NY (see this link).
• Focus today rests firmly on the BoJ outcome. Considering the adjustments made to the BOJ’s YCC framework in July, our analysis aligns with the prevailing consensus, anticipating that the BOJ will maintain its existing policies in the upcoming announcement, including the short-term interest rate remaining at -0.1% (see our full preview here).
• We also have data on tap today, with most focus on the August CPI print. The market expects headline at 3.0% y/y (prior 3.3%) and ex fresh food 3.0% y/y (prior 3.1%). The ex fresh-food, energy measure is forecast at 4.3% (prior 4.3%).