FX Daily: Fight the yen at your own risk
USD: USD/JPY story dominates Yen moves have continued to dominate the start of the week. Thin liquidity due to the US holiday likely amplified yesterday’s USD/JPY sell-off, pushing the pair through the key 155.0 level before extending to 153.0 overnight. This still looks primarily like a JPY story rather than evidence of a broader shift ...
The Japanese yen has continued to dominate currency markets this week, with thin liquidity likely exacerbating yesterday's USD/JPY sell-off. The pair broke below the key 155.0 level before extending to 153.0 overnight, suggesting a strong yen rally. Analysts believe this move is primarily driven by a hawkish Bank of Japan and increased domestic ownership by the GPIF.
Despite short-term fundamentals suggesting the move may be overdone, it remains risky to stand in its way, particularly with further carry trade unwinding. The next meaningful support for the yen is at 152.0, where the rally stalled in January and February. A break below this level could open the way towards 150.0. While the euro remains relatively expensive due to European resilience, the yen's strength has spilled over into broader dollar weakness.
Markets are currently pricing around 15bp of tightening for September, and US equity futures indicate a softer reopening today, which could provide some support for the dollar. The bullish case for the dollar remains stronger in the near term, but the upcoming US CPI release remains a clear risk event.
Written by urgent.news from Hellenic Shipping News's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
