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Yen Rally Spikes Significantly Amid No New Headline Drivers

FOREX
  • The Japanese yen has been on the front foot all day and intra-day pressure on JPY shorts eventually hit breaking point, prompting a dramatic spike for the currency. This saw the likes of USDJPY trade down to the lowest level since August 7, briefly recording a Bloomberg low of 141.70, in what seems to be liquidity evaporating as multiple tech levels were blown through and no new specific drivers were behind the JPY bid.
  • Furthermore, EURJPY printed at 153.23, roughly 11 big figures from the October highs as market momentum gathered steam.
  • The initial moves were triggered by the cumulative effect of appearances from BoJ's Himono and Ueda, both of which strongly suggested that the BoJ are already considering how to exit NIRP once economic conditions justifying a policy switch are met. A poorly received longer-end JGB auction added to the early JPY impetus.
  • More broadly, currency markets have kept more contained ranges ahead of tomorrows key US labour data, with EURUSD in a relatively tight 63 pip range. Tomorrow’s release will be given extra significance given the increased bets on fed easing in 2024 and the most recent volatility for currencies sensitive to an adjustment in yield differentials. As a reminder, the Fed decision then falls on December 13 and the BOJ decision is scheduled for December 19.
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