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Yen Takes Nosedive Amidst BoJ Deliberations

FOREX

Selling pressure piles on the yen, rendering it the worst performing G10 currency ahead of the BoJ's monetary policy announcement. The timing of the latest leg higher in USD/JPY roughly coincides with a fresh round of comments from Japanese FinMin Suzuki.

  • Japan's Finance Minister refused to comment at length on the ongoing BoJ meeting but he expressed hope that the Bank will continue efforts towards reaching its inflation target and reminded that Gov Kuroda vowed to persistently continue with his current stance. Some may have interpreted his comments as a signal reducing the chance of any significant hawkish pivot from the BoJ, even as the official reiterated that the authorities are concerned about rapid yen weakening.
  • Separately, Bloomberg trader sources cited USD/JPY purchases from Tokyo-based accounts anticipating a stand-pat BoJ decision, with rising U.S. Tsy yields driving fund-related demand.
  • USD/JPY is up ~75 pips as we type, even as its 1-month risk reversal extends losses to the lowest levels (= largest bearish bias) since March 2020. Implied volatilities remain very elevated, albeit the overnight tenor has eased off from yesterday's peak.
  • Yen weakness has allowed the U.S. dollar to find poise after yesterday's retreat, with the BBDXY index staging a rebound in tandem with an upswing in USD/JPY.
  • The Antipodeans struggled for any topside impetus as regional equity markets underperform on a negative lead from Wall Street, while crude oil trades on a softer footing.
  • Final EZ CPI & U.S. industrial output take focus from here, while comments are on tap from Fed's Powell, ECB's Simkus as well as BoE's Pill & Tenreyro.
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Selling pressure piles on the yen, rendering it the worst performing G10 currency ahead of the BoJ's monetary policy announcement. The timing of the latest leg higher in USD/JPY roughly coincides with a fresh round of comments from Japanese FinMin Suzuki.

  • Japan's Finance Minister refused to comment at length on the ongoing BoJ meeting but he expressed hope that the Bank will continue efforts towards reaching its inflation target and reminded that Gov Kuroda vowed to persistently continue with his current stance. Some may have interpreted his comments as a signal reducing the chance of any significant hawkish pivot from the BoJ, even as the official reiterated that the authorities are concerned about rapid yen weakening.
  • Separately, Bloomberg trader sources cited USD/JPY purchases from Tokyo-based accounts anticipating a stand-pat BoJ decision, with rising U.S. Tsy yields driving fund-related demand.
  • USD/JPY is up ~75 pips as we type, even as its 1-month risk reversal extends losses to the lowest levels (= largest bearish bias) since March 2020. Implied volatilities remain very elevated, albeit the overnight tenor has eased off from yesterday's peak.
  • Yen weakness has allowed the U.S. dollar to find poise after yesterday's retreat, with the BBDXY index staging a rebound in tandem with an upswing in USD/JPY.
  • The Antipodeans struggled for any topside impetus as regional equity markets underperform on a negative lead from Wall Street, while crude oil trades on a softer footing.
  • Final EZ CPI & U.S. industrial output take focus from here, while comments are on tap from Fed's Powell, ECB's Simkus as well as BoE's Pill & Tenreyro.