Japanese Yen Traders Face MoF and BoJ as USD/JPY Targets 150

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Thursday’s Asia-Pacific Outlook

A bearish trading session in New York puts Asia-Pacific markets at risk, with a stronger US dollar putting pressure on risk-sensitive assets. The benchmark S&P 500 index fell 0.67%, with ten of its eleven sectors closing in the red. Energy outperformed as WTI crude oil prices rose after the US Energy Information Administration (EIA) reported a surprise drop in crude oil inventories for the week ending October 13.

The DXY US Dollar Index rose as the greenback’s safe-haven status attracted inflows of risky assets. Australia’s September jobs report is due today, with the Bloomberg consensus showing an expected gain of 25,000 jobs and a stable unemployment rate of 3.5%.

The Reserve Bank of Australia (RBA) has already moved away from an aggressive rate hike path earlier this month. That said, anything but a huge beat would likely leave the Aussie dollar on its downward trajectory.

Despite the Australian data, traders are heavily focused on the Japanese Yen. The dollar was no exception against the Japanese currency, with USD/JPY rising nearly 0.5% throughout EU/US trading hours.

The threat of a new intervention by the Bank of Japan at the request of the Ministry of Finance is at the heart of the concerns of market participants. Options traders added downside protection on the dollar-yen, as evidenced by falling risk reversals (see chart below).

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