Yen Outperforms In G10 Space, North Korean Missile Drill In Focus

Tuesday saw USD/JPY register losses despite a partial rebound expectation-beating U.S. data, with pre-FOMC musings taking centre stage. The rate has resumed its decline this morning, with the yen topping the G10 pile.

• Yield differentials expanded as U.S. JOLTS & manufacturing PMI data beat expectations ahead of the FOMC's monetary policy review today. The spread on 2-Year bonds widened 6.4bp, while 10-year gap was 2.1bp narrower come the end of play, paring earlier tightening.
• Spot USD/JPY bounced off support from the Y147.00 mark on renewed sales of U.S. Tsys, but the pair failed to recoup the entirety of its initial losses.
• Equity sentiment post-Asia was mixed, with European indices trading in the green and U.S. benchmarks registering losses. The VIX index was little changed.
• BoJ Gov Kuroda speaks in parliament at typing, he notes that Japan is no longer in deflation since the central bank launched its easing programme.
• A North Korean missile test drew attention this morning, albeit the projectile has likely already fallen into waters without causing any damage.
• Spot USD/JPY trades -62 pips at typing, changing hands at Y147.65. The yen is the best G10 performer. From a technical viewpoint, bears look for losses towards Oct 27 low of Y147.11, while bulls keep an eye on Oct 21 high of Y151.95.