Yen Regains Poise On Verbal Intervention, Aussie Paces Gains In G10 FX Bloc

The yen clawed back its initial losses as Japan's currency czar Kanda refused to rule out any options in terms of FX responses, while stressing that the authorities are watching FX markets with a sense of urgency and stand ready to act appropriately.

• Tokyo stepped up its verbal interventions after the release of expectation-beating U.S. CPI data on Tuesday, which prompted participants to add hawkish Fed bets, promoting sharp widening in U.S./Japan yield spreads. The two-year differential reached its widest levels since 2007.
• USD/JPY ran as high as to Y144.96 this morning, finding itself in the vicinity of key resistance from recent cycle high/round figure of Y144.99/145.00, before Kanda's comments arrested the yen's decline, returning the pair to virtually neutral levels.
• The yen's recovery sapped some strength from the broader USD, with the BBDXY index pulling back from fresh weekly highs as a result. The index has now stabilised and last sits near unchanged levels as U.S. Tsy yields have extended gains in cash Tokyo trade.
• The Antipodeans pace gains in G10 FX space, by narrow margins as major crosses hold tight ranges. Stabilisation in market sentiment (e-mini futures are slightly higher) may be lending some support to AUD & NZD.
• The Korean won dropped as onshore markets re-opened absorbing the post-U.S. CPI impetus, with local authorities noting that they are closely monitoring FX markets. Spot USD/KRW topped out at KRW1,395, its highest point since 2009.
• Consumer inflation data from the UK and Sweden will cross the wires in European hours, before the release of U.S. PPI figures. Comments are due from ECB's Villeroy.