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• The scale and pace of the JPY move this week will be triggering speculation of official intervention in FX markets which, if confirmed, would be the first formal intervention since July last year. Nonetheless, price action and official behaviour so far has not met the pattern of historical formal intervention.
• We are yet to see the usual, more aggressive verbal jawboning that has historically preceded intervention (language including "deeply concerned about FX moves", "will take appropriate response if excessive FX moves"). FinMin Kato's language yesterday appeared more restrained: "refraining from commenting on market moves", "will closely watch any excessive moves".
• We also note USD/JPY's 1 month and 3 month rate of change is comfortably below levels that prevailed during previous intervention episodes. Both metrics are around +2% firmer, which is elevated but well within historical norms.
• That said, a number of xxx/JPY crosses are entering technically overbought territory on the recent rally - triggered by Takaichi's LDP victory and the subsequent backtracking of BoJ rate hike expectations.
• With EURJPY, CHFJPY extending to new alltime highs and short-term momentum measures all accelerating (USDJPY dmas should form a golden cross (50-dma > 200-dma) in the next few days), markets are clearly looking through Takaichi advisor Honda's comments on Monday that USDJPY beyond 150.00 is "a bit too much".

Fig 1: USD/JPY 1mth & 3mth Rate Of Change - Within Historical Norms 

Source: Bloomberg Finance L.P./MNI 

ERF6 98.1875/98.3125cs vs ERM6 98.37/98.50cs, bought the June for half in 5k.

• MBA composite mortgage applications fell -4.7% (sa) last week as they continued to chip away at the refi-driven jump in the first half of September.
• Composite applications were -4.7% after -12.7% the week prior, following a 30% increase in the week to Sep 12 and 9% before that in the week to Sep 5.
• Refis were -7.7% after -20.6% and with respective earlier gains of 58% and 12%, whilst new purchase applications were -1.2% after -1.0% and gains of 2.9% and 6.6%.
• Levels relative to 2019 averages: composite at 68% vs a recent three plus year peak of 82% in September, refis at 68% and new purchases at 66%.
• A small decline in 30Y mortgage rates didn’t offer much support on the week, easing to 6.43% (-3bp) after a 12bp increase the previous week. The 6.34% seen in the week to Sep 19 was the lowest since Sep 2024 after a 35bp decline in four weeks starting late August.
• Interestingly, the 30Y mortgage to 10Y Tsy yield spread continues to hover marginally above 230bp having eased modestly since US Tsy Sec Bessent in August talked on wanting to keep the spread between mortgage rates and treasuries flat or even bring it down. These are some of the lowest spreads since Mar 2022.
• The spread to 10Y swap rates meanwhile has averaged 280bp for three weeks now, a tightening from the 300 +/-5bp range seen for some time since reciprocal tariff announcements in April. It’s a little below the 285bp averaged in Q1.