Yen was a mover right from the early hours here in Asia. Over the weekend was a report in Japan’s Kyodo media that Prime Minister Kishida and his government were set to revise the 2013 joint statement with the Bank of Japan (BOJ) that commits the central bank to achieve its 2% inflation target “at the earliest date possible.” Kyodo news agency cited government sources.
Note that Kishida, if this report is factual, will be discussing a new statement with the new Bank of Japan Governor who will replace current governor Kuroda when Kuroda departs his role in April of 2023.
For those unfamiliar with the early hours in Asia each Monday, wholesale FX trade pretty much kicks off with New Zealand. New Zealand is two hours ahead of the east coast of Australia (Sydney and Melbourne markets), four hours ahead of Tokyo, and five hours ahead of Singapore and Hong Kong. Liquidity in New Zealand early Monday is extremely thin and forex moves can be extended as spreads widen and (in this case) bids get slammed (in yen crosses, mainly USD/JPY at this time). USD/JPY dropped rapidly. From Friday’s NY close circa 136.70 and thereabouts, USD/JPY dropped under 136.00.
This thinly-traded ‘gap’ was then retraced over subsequent hours, USD/JPY rising back to highs circa 136.60. By then Asian markets were much more active and regular trade liquidity had returned (nervously given the wild swings early). USD/JPY has since dropped back to low around 135.80 and bounced again. The bounce from the second visit to the downside came about after Japan chief cabinet secretary Matsuno denied the reports of a renegotiation to come with the Bank of Japan. I’d humbly suggest that Matsuno is not being upfront on this, the reports of change to come from the BOJ once Kuroda’s term expires are persistent and widespread.
As an aside, the Bank is meeting Monday and Tuesday, the December policy statement is due on Tuesday, 20 December 2022 sometime around 0230 to 0330 GMT. No change to the main planks of policy is expected.
Elsewhere across major FX moves were not as wide. In general the USD has lost a little ground. Optimism on improvement to come from China’s economy added a better tone to non-USD forex. The conclusion to China’s Central Economic Work Conference resulted in generic comments in state media on addressing the COVID issue in China, and economic support measures. We will get a more detailed look at what the measures will be in March of 2023.
Regional equity indexes traded down on the session. Japan’s Nikkei, Hong Kong’s Hang Seng and mainland China indexes all lower.
USD/JPY 10 minute candles: