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Yen Weakness Persists Amid Reduced Demand For Havens

JPY

USD/JPY managed to trim its weekly decline on Friday amid a rebound in U.S. equity markets. Positive sentiment has carried over into the first Asia-Pac session of this week, reinforced by a mortgage rate cut in China (to a new low of 4.40%, for first home buyers) and partial relaxation of COVID-19 countermeasures.

  • In the wake of Friday's upswing, USD/JPY 3-month 25 delta risk reversals sits around 0.46 vol, though puts are still favoured over calls. Other tenors moved in similar fashion.
  • Spot USD/JPY trades at Y129.49, up 27 pips on the day, with bulls looking for further gains towards May 9 high of Y131.35. Bears would be pleased by a dip through May 12 low of Y127.52, which would expose Apr 27 low of Y126.95.
  • Note that the weekend saw Nikkei sources report that the Japanese government will use deficit-financing bonds to cover Y2.7tn of extra spending under a supplementary budget, as it looks to shield consumers and businesses from the well-documented global inflationary pressures.
  • Worth noting that BoJ Gov Kuroda will speak in parliament later today.
  • Japan's flash GDP figures headline the local data docket this week and will hit the wires on Wednesday, with final industrial output due on the same day. Looking further afield, trade balance & national CPI will be published on Thursday and Friday respectively.
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USD/JPY managed to trim its weekly decline on Friday amid a rebound in U.S. equity markets. Positive sentiment has carried over into the first Asia-Pac session of this week, reinforced by a mortgage rate cut in China (to a new low of 4.40%, for first home buyers) and partial relaxation of COVID-19 countermeasures.

  • In the wake of Friday's upswing, USD/JPY 3-month 25 delta risk reversals sits around 0.46 vol, though puts are still favoured over calls. Other tenors moved in similar fashion.
  • Spot USD/JPY trades at Y129.49, up 27 pips on the day, with bulls looking for further gains towards May 9 high of Y131.35. Bears would be pleased by a dip through May 12 low of Y127.52, which would expose Apr 27 low of Y126.95.
  • Note that the weekend saw Nikkei sources report that the Japanese government will use deficit-financing bonds to cover Y2.7tn of extra spending under a supplementary budget, as it looks to shield consumers and businesses from the well-documented global inflationary pressures.
  • Worth noting that BoJ Gov Kuroda will speak in parliament later today.
  • Japan's flash GDP figures headline the local data docket this week and will hit the wires on Wednesday, with final industrial output due on the same day. Looking further afield, trade balance & national CPI will be published on Thursday and Friday respectively.