As noted earlier this morning, the USD bias has shifted regardless of the U.S. data and the USD sell-off has stalled. USD/JPY remains better bid at 120.23 despite another foray in US bond yields towards the 4.64% lows from this morning. The view that emerged in the Japanese press this week that the JGB market is reflecting rising expectations that Japan will not hike rates until late in 2007 continues to support USD/JPY.
However, offers remain firm at 120.50/55 and are unlikely to be tested ahead of the weekend. Looking ahead, the focus is turning to return of Japan to the markets after Golden Week and to see whether a resumption of foreign currency investment demand emerges as well. A light economic calendar is scheduled for next week in Japan with the BOJ minutes due on Monday and BOJ Fukui speaking on May 10th.
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