The market shrugged off rising expectations of a BoJ rate hike. Various media reports out Friday and over the weekend tipped a move in rates at the end of the week. The talk weighed on USD/JPY and the JPY crosses overnight but they bucked the trend in Europe, led by heavy GBP/JPY demand.
Real money names and Middle Eastern accounts were big GBP buyers and this filtered through the cross, with the pair scaling 237.00 after starting the European session at 235.65. EUR/JPY made up ground as a consequence of this activity, with the pair rallying from the mid 155's and extending through 155.85-156.00 offers to record a 156.09 session high. Offers above 156.00 manage to contain price action and the pair hovered around 156.00 for the remainder of the session.
USD/JPY was capped early on by 120.45 but pushed higher amid good cross JPY activity. Interbank demand and real money interest via the legs saw the pair trade up to 120.60. An increase in exporter offers kept the pair within a narrow range, with bid interest offset by Japanese name presence between 120.50-120.60. We expect the crosses to lead action in the European afternoon session.
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