JPY extended losses after starting the European session on the softer side following the BOJ's decision to raise rates by 0.25%. BOJ Governor Fukui assured the market that rate moves would be gradual and that no consecutive hikes would take place. He cited carry trades as one area when considering policy, yet said that recent JPY weakness was not from carry trades alone.
The market was buoyed by these remarks and speculative accounts and fund names piled into the carry trade. USD/JPY rallied from 120.25/30 towards the 120.50 Asian high. The pair probed 120.60 offers and despite choppy price action managed to clear 120.65 stops and 120.75/80 offers to print a 120.94 high. Large size option strikes at 120.50 and 120.60 supplied the market with good selling, along with standing interest from exporters and other Tokyo based accounts.
Elsewhere, EUR/JPY pushed up towards the 159.00 on reports of leverage fund demand and real money activity. Large selling interest into 159.00 capped, with reports of options interest, exporter activity and commercial based activity from sovereign names. US names bids at 158.65/70 underpinned on any pullback.
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