[LFX]

USDJPY traded to the high of 92.33 as US bonds yields edged higher on Friday ahead of the large USD123bn in Treasury auctions this week. The UST 2Y note closed above 1% for the first time since September. The theme of UST yields is likely to dominate the direction of USDJPY this week, with upside pressure on UST yields given the supply, and hence is likely to support USDJPY. This morning, USDJPY was sold off to the 91.57 level following a paper published by PBOC Research calling for a shift in China’s FX Reserves away from USD to the euro and yen. However, clarification that the author’s view was “purely personal” eased the USD sell-off and USDJPY resumed trading higher. JPY also faces downward
pressure from yen crosses, as demand for EURJPY and AUDJPY soars. The week ahead sees Japanese key releases including retail sales, CPI, employment and the BOJ meeting on Friday; the focus will be on whether the BOJ will end some of its corporate debt buying program. Traders expect USDJPY to trade higher to the 92.50area this week.