BOJ rate speculation continues to drive price action. Yesterday's reports suggested that the BOJ are unlikely to hike rates, although the market is still pricing in a 30% chance of a move. This is down on previous expectations, encouraging further JPY losses overnight.
USD/JPY was carried higher but was unable to overcome sizeable offers. There was increased speculation that the MOF may have asked Japanese exporters to buy JPY on growing fears of US protectionism from the Democratic controlled US Senate. A Swiss name led the selling on two occasions. Once in Tokyo and as the London market opened. USD/JPY pushed through 120.60 and 120.50, with light CTA stops filled. Japanese bid interest was noted and ongoing options interest underpinned at 120.35. EUR/JPY traded correctively after struggling to move higher.
Offers emerged above 156.00 from exporters and real money accounts. The pair moved through the 155.75 support and eventually found support just ahead of 155.50. Focus will remain on the USD/JPY topside amid reduced BOJ rate hike risk. A couple of the large option triggers expire today, with combined payouts of USD 25 million.
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