EUROPEAN FX UPDATE: Yen roars back as BoJ expands YCT band

Analysis details (10:13)

JPY/DXY

The Yen paused for breath during BoJ Governor Kuroda’s post-meeting press conference when he played down the significance of a wider 10 year JGB target range in context of a pivot or tightening move, but regained momentum thereafter to extend its already impressive recovery gains vs the Buck and other rivals, as the ‘technical’ adjustment continued to reverberate. Usd/Jpy printed/probed 132.00 from highs not far off 137.50 before the YCC surprise and Yen crosses recoiled further to offer the Greenback some indirect support against other majors by virtue of its base status. However, the Dollar index retreated within a 104.790-103.930 range ahead of US housing data that is forecast to reveal another slowdown in the pace of starts and building permits.

CHF/EUR/CAD

Notwithstanding the aforementioned heavy Jpy cross losses, the Franc, Euro and Loonie took advantage of the DXY downturn to claw back declines against the Greenback to test resistance around 0.9250, 1.0650 and 1.3600 respectively, with Usd/Chf shrugging off a narrower Swiss trade surplus, Eur/Usd hardly hampered by softer than forecast German producer prices and Usd/Cad unruffled by the latest dip in oil prices awaiting Canadian retail sales.

GBP/NZD/AUD  

All narrowly mixed vs the Buck after wild and whipsaw moves post-BoJ overnight, as Sterling hovered midway between 1.2223-1.2086 extremes, the Kiwi skirted 0.6350 within a 0.6301-95 band and the Aussie settled just under 0.6700 having peak beneath 0.6750 and troughed sub-0.6650. Note, Nzd/Usd and Aud/Usd both lagged due to independent factors such as a deterioration in ANZ business survey metrics and dovish vibes from this month’s RBA minutes (namely the revelation that a pause in tightening was one of the options on the table with 50 bp and the 25 bp hike delivered).

SCANDI/EM  

Risk aversion adversely impacted the Sek more than the Nok that gleaned some traction from Brent retaining sight of Usd 80/brl, while the Zar maintained a degree of political premium and the Cnh/Cny took unchanged Chinese LPRs largely in stride as the focus remains firmly on the unfolding Covid situation, but the Try slipped in tandem with Turkish consumer sentiment.

20 Dec 2022 - 10:13- Fixed IncomeEconomic Commentary- Source: Newsquawk