JPY: Yen Extends Losses, Earthquake Strikes Japan
Recovery in risk appetite stemming from China's equity market dynamics flagged before and the risk-on reaction to Fed Chair Powell's post-FOMC presser sapped strength from the yen Wednesday, with USD/JPY extending its winning streaks to eight consecutive days (longest such streak in over five years). The rate printed its best levels since Feb 3, 2016 as it topped out at Y119.12.
- The yen remains the worst G10 performer, with USD/JPY last +22 pips at Y118.94. A break above Y119.12 would prompt bulls to target the Y120.00 figure. Bears look for a retreat under Mar 14 low of Y117.28.
- A magnitude-7.3 earthquake struck northern Japan Wednesday evening, killing two people and leaving dozens injured, derailing a bullet train and causing electricity disruptions. The authorities warned residents of Fukushima, Miyagi and Yamagata prefectures that aftershocks may follow.
- BoJ Gov Kuroda will speak to lawmakers today, with Japan's CPI and BoJ monetary policy decision set to take focus tomorrow.
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JPY: Japanese Economy Returns To Growth
USD/JPY see-sawed Monday as the Russia-Ukraine standoff continued to inspire market volatility, eking out some modest gains at the end of the day. The rate trades -8 pips at Y115.46, with bears looking for a dip through yesterday's low of Y115.01 before targeting Feb 2 low of Y114.16. Bulls need a break above Feb 10/Jan 4 highs of Y116.34/35 to see a resumption of the uptrend.
- Japan's economy grew 5.4% Q/Q in Q4 aided by better than forecast consumer spending, preliminary data showed. Expansion was slower than expected (+6.0% Q/Q) but the previous reading was revised to -2.7% from -3.6%.
- Final industrial output data will hit the wires later today. Looking further afield, trade balance and CPI will hit the wires on Thursday and Friday respectively.
- Osaka Governor Yoshimura said Monday that he will refrain from asking the central government to impose a state of emergency in the city as Covid-19 cases appear to be peaking, albeit he expects that quasi-emergency (due to expire Sunday) will be extended. NHK reported that virus countermeasures could be extended in Osaka and some other prefectures.
- Worth noting that BoJ Gov Kuroda speaks as we type.
US TSYS: A Touch Richer
Cash Tsys are ~0.5-1.5bp richer, with modest bull flattening observed shortly after the re-open. It may be the case that the region is a little tentative re: the Russia-Ukraine situation, but it may be as simple as some regional dip-related demand/short covering in play, with U.S. 10s failing to sustainably break above 2.00% in yield terms once again on Monday. TYH2 +0-04 at 126-03+.
AUD: Aussie Recoups Losses, RBA Minutes Eyed
AUD/USD shed a handful of pips Monday, with the Russia-Ukraine situation stoking further market volatility. Diplomatic efforts to defuse the crisis continued, while Russian President Putin & Foreign Min Lavrov used a staged television address to express support for further talks with the West. Elsewhere, Ukrainian President Zelensky walked back his prediction that Russia would attack on Wednesday, playing down that comment as "sarcastic" and mocking earlier press reports. The choreographed showing from Putin & Lavrov brought reprieve to risk assets, paving the way for AUD/USD to recoup the bulk of its earlier losses.
- The rate last operates at $0.7131, little changed on the day. Topside focus falls on Feb 10 high of $0.7249 and a break here would bring Jan 20 high of $0.7277 into play. On the flip side, losses past Monday's low of $0.7086 would clear the way to Feb 4 low of $0.7052.
- Monthly labour market report, due Thursday, headlines the local data docket during the remainder of this week. Elsewhere, the RBA will publish the minutes from their most recent monetary policy meeting later this morning.
