EUROPEAN FX UPDATE: Yen attempts to stop the rot after another sharp drop

Analysis details (09:53)

JPY/DXY

No sign of physical intervention, as the BoJ and MoF appear to be somewhat divided on the pros and cons of a weaker currency, but the Yen is staging its second recovery effort in three sessions following further depreciation across the board. Barriers at 122.50 against the Dollar held overnight and Usd/Jpy snapped back in relatively swift fashion to the low 121.00 area before bouncing again to test 122.00 and subsequently settle around 121.50. Pre-weekend positioning, profit taking and broader Yen short covering have all been cited as catalysts along with the start of balance sheet adjustments for fiscal year 2021/22 that ends on March 31. Meanwhile, the Greenback is grinding and largely restrained vs other major peers as the index continues to meet offers ahead of 99.000 and pivots 98.500 instead awaiting a firm break that in truth may not come via Friday’s US schedule unless Fed’s Williams and/or Barking really deliver something new after pending home sales and final UoM sentiment readings.

CHF/EUR/SEK

The next best G10s, and the Franc perhaps regaining some safe-haven allure as the Russia-Ukraine war extends beyond the one month mark, while the Euro is holding up quite well irrespective of a bleak German Ifo survey and the Swedish Krona continues to glean traction from signs that the Riksbank is less tolerant to high inflation. Usd/Chf is below 0.9300, Eur/Chf just above 1.0200, Eur/Usd keeping afloat of 1.1000 where decent option expiry interest resides (1.69 bn) and Eur/Sek is circa 10.3300.

NZD/AUD/GBP/CAD/NOK  

A loss of momentum for the Kiwi in the high 0.6900 zone and the Aussie approaching 0.7550, while Sterling has retreated from 1.3200+ vs the Buck and through several tech supports against the Euro either side of 0.8350 in wake of weaker than forecast UK retail sales data and a deterioration in GfK consumer sentiment. Elsewhere, softer oil is undermining the Loonie and Norwegian Crown, with Usd/Cad closer to 1.2550 than 1.2500 and Eur/Nok rebounding fairly strongly from post-Norges Bank lows to straddle 9.5500.

EM

The Try remains pressured after Turkish President Erdogan insisted that S-400 orders from Russia are a done deal, while the Zar has lost a bit of its post-SARB vigour, but the Mxn is maintaining strength on the back of hawkish guidance from Banxico to go with its latest hike.

25 Mar 2022 - 09:52- Fixed IncomeResearch Sheet- Source: newsquawk