Yen Takes Lead On Monday

The yen took the lead in G10 FX space on Monday, as risk appetite soured amid lingering concerns surrounding the spread of the Delta variant. USD/JPY sold off sharply in European hours, printing a two-week low as a result, before trimming some losses in the NY session.

• Japan's Defence Min Kishi (privately the younger brother of ex-PM Abe) told the FT that the international community should put greater effort into ensuring the "survival of Taiwan," as China's moves "work to envelop" the self-governed island. His rhetoric marks a further escalation in Japan's increasingly pro-Taiwanese foreign policy stance, which puts Tokyo on a collision course with Beijing.
• Elsewhere, Tokyo Olympics organisers said that just 0.02% of tests for Covid-19 taken by athletes and stakeholders came back positive, even as the Covid-19 situation in Tokyo and neighbouring provinces has rapidly deteriorated.
• Japanese highlights this week include Tokyo CPI (today) & earnings/spending data (Friday). The core metric of consumer prices in Tokyo is expected to have remained unchanged in July, according to Bloomberg consensus.
• USD/JPY last sits at Y109.33, little changed on the day. A retreat under yesterday's low of Y109.19 would shift downside focus to Jul 19 low of Y109.07. Conversely, a move through Jul 23 high of Y110.59 would expose Jul 14 high of Y110.70.