EUR/JPY sat centre stage today, following ECB's 25bp rate hike as NY opened. In the Q&A session ECB's Trichet addressed the EUR/JPY exchange rate, saying that he sticks with his comments on EUR/JPY made at the G7 in Singapore. However he was being a bit sly, because at the G7 he didn't comment on EUR/JPY, he addressed the matter obliquely back then, stating "We discussed the state of the Japanese economy. We noted that it has exited the zero-interest rate policy and that its recovery is now broadly based, and we agreed that the yen will reflect these developments." Nonetheless the market got his drift, and EUR/JPY dropped from 149.55 to 149.00, where a barrier option was located. That was the low (the screens showed an 01 print) and the pair quickly rebounded to 149.40, and closed at 149.35. A large European supranational was noted on the bid.
USD/JPY was a much more sedate affair, trading in a relatively narrow 117.45-80 range, closing at 117.65. Middle East sellers were noted in the mid- 50s, and exporters, speculative accounts and options supply kept the pair offered in the 117.50-60 region. Importer and Japanese agency bids were noted around 117.50.
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