Ishiba comments help define yen's comfort zone
Yen traders inclined to seek political signals for the Japanese currency should start with Prime Minister Shigeru Ishiba's comments this month, which bracketed a 143-149 USD/JPY range.
Over the weekend, Ishiba said he would not intervene in monetary policy affairs, hawkish signaling given the BOJ’s tightening bias. The comments appeared after USD/JPY recently moved above 149, unraveling nearly all the yen gains since the BOJ hiked rates on July 31.
On Oct. 2, USD/JPY surged about three big figures from 143.60 when Ishiba, after a meeting with BOJ Governor Kazuo Ueda, said the economy was not ready for further interest rate hikes. At the time, Ueda sketched out a cautious approach to tightening, mentioning unstable currency markets and uncertainties.
While USD/JPY is at the range top as global risk appetite improves, data suggests markets are not yet piling into yen carry trades. The latest weekly CFTC report shows futures traders remain long the Japanese currency and options volatility continues to drop as USD/JPY rises.
This picture of market calm would likely change if USD/JPY eclipses nearby 150 barriers and its daily Ichimoku cloud at 151.81. A swift climb toward the latter might lead some traders to expect more signaling.
The has yen weakened nearly seven big figures over the past two weeks. Next, markets will scrutinize a speech by BOJ policymaker Seiji Adachi on Wednesday.
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Yen chart https://tmsnrt.rs/3A0U5Wy
(Robert Fullem is a Reuters market analyst. The views expressed are his own.)
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