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Yen Rebounds As Official FX Rhetoric Rises, Busy Data Schedule Today


USD/JPY printed a new cycle high of 140.93 in early European trade Tuesday, but the pair backtracked following an unscheduled tri-party meeting held between the Japanese FSA, the Ministry of Finance and the Bank of Japan. Following the meeting, Japan's currency diplomat Kanda warned that the Ministry would take appropriate steps on currency markets if required, and outlined their intention to consider various options.

  • In NY trade we got to lows just under 139.60, with a softer US yield backdrop helping. We edged back up to 139.75/80 by the close, which is where we currently sit. Rhetoric from the authorities around FX has picked up in recent session and has coincided with yen weakness beyond 140.00.
  • The 1 month risk reversal edged down slightly to -1.595, while 1 month implied vols sit just off multi-week highs, above 11%.
  • A weaker yen would put pressure on the Bank of Japan to move more quickly to increase the flexibility of its yield curve control framework, though the Governor Kazuo Ueda would be reluctant to make such a move soon and remains determined to stick to ultra-easy policy settings, MNI understands, see this link for more details.
  • On the data front today, Apr retail sales, IP, consumer confidence and housing starts are all on tap.

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