USD/JPY was sidelined overnight, oscillating around the 77 level for most of the session.
Japan officials would have been happy to see USD/JPY move back above 77, after having dipped significantly below this level earlier in the week. There had been a spike in the pair to 77.5 yesterday on ‘rumours’ that the MOF was checking rates. Strength in the USD emerged, as US Treasury yields moved lower early in the day, as the headlines out of Europe resulted in safe-haven flows. The price action reversed when Wall Street investors sent equities and commodities higher.
The 10-year Treasury yield moved as low as 1.99%, before closing around 2.06%. The pair has managed to hold above 77 this morning and is in for a big day, with plenty of data set to come out of Japan. Traders will be eyeing Japan’s monetary policy statement, the BoJ press conference and the overnight call rate. It is likely that all of these key events will spook the short sellers with the possibility of comments on the currency action. A clearer indication of what to expect from the BoJ/MOF going forward could be a key catalyst for USD/JPY.