Yen Shows Weakness Despite Aversion To Risk

Tuesday's European/U.S. hours brought a rebound in USD/JPY, allowing the rate to extend its winning streak to three days in a row. Defensive flows failed to provide durable support to the yen but aided the dollar.

• The rate climbed regardless of a pullback in U.S. Tsy yields, which resulted in a re-tightening in U.S./Japan 10-Year Yield spread late doors. There was talk of month-end rebalancing playing a role in greenback outperformance.
• USD/JPY 1-month risk reversal snapped a five-day losing streak and crept higher on Tuesday, albeit it did not move far away from 10-day lows printed at the start to the week.
• Spot USD/JPY last deals at Y136.02, down 11 pips on the day. A further pullback under Jun 23 low of Y134.27 would shift focus to key support from Jun 16 low of Y131.50. On the topside, the initial target is provided by Jun, 2022/Oct, 1998 highs of Y136.71/136.88.
• The Nikkei reported that Japan's Government Pension Investment Fund (GPIF) has reduced its holdings of Russian stocks and bonds to "almost zero" and eyes selling remaining Russian assets, with no plans of new investments.
• Japan's retail sales are due for release shortly. Annual growth is expected to have accelerated to +4.0% from the upward revised +3.1% recorded in April. Note that Japanese data rarely cause larger movements in the yen.