[LehmanBr]

USDJPY was higher in thinly traded markets with Japan and US on holiday as higher US bond yields and cross yen buying pushed the yen lower. A succession of hawkish comments from Fed officials culminating in a re-run of a July speech by Bernanke suggested that USD rates may move earlier and faster than expected. The verbal intervention is believed to be a direct result of the pressure that has been brought to bear on the USD – with the Fed concerned that a too-rapid decline in the USD might lead investors to flee. The resulting higher long-term rates would put further pressure on an already weak economic recovery. Market looks for USDJPY to move higher on this correction, probably up to the 92 handle. Longer term however, continuing US bearish factors are likely to push both yields and USDJPY lower.