USD/JPY had a sharp fall in very early Asia, dropping from circa 139.50 to lows under 138.90. The swings didn’t finish there, with lows for the session (as I write) under 138.75 before a move back up to above 139.50. Speculation swirled of a Bank of Japan ‘tweak’ to its yield curve control program. Yen liquidity remains thinner than usual as traders in the region we await the announcement. The longer the wait is for the announcement the more likely it is that the Bank has made some sort of tweak or policy change.

Tokyo core-core CPI for June rose above 4%, confirming solid underlying inflation pressure. Yield on the 10 year Japanese Government Bond rose above 0.5%, which is the upper limit of the bopjj tolerance band (zero +/- 50bp).

Yen-crosses excluded, moves elsewhere across major forex rates were not nearly so dramatic.

Asian equity markets:

  • Japan’s Nikkei 225 -1.3%

  • China’s Shanghai Composite 0%

  • Hong Kong’s Hang Seng -0.5%

  • South Korea’s KOSPI -0.4%

  • Australia’s S&P/ASX 200 -1%

usdyen swings ahead of the Bank of Japan decision 28 July 2023