- USD/JPY witnessed an intraday turnaround from a fresh weekly high touched earlier this Wednesday.
- Credit Suisse crisis triggers a massive sell-off in equities and boosts demand for the safe-haven JPY.
- A blowout intraday USD rally lends some support to the pair and helps limit losses, at least for now.
The USD/JPY pair retreats sharply from a fresh weekly high, levels just above the 135.00 psychological mark touched earlier this Wednesday and drops to a fresh one-month low during the North American session. Spot prices, however, manage to rebound a few pips in the last hour and now seem to have stabilized just below the 133.00 round-figure mark.
The global risk sentiment takes a turn for the worst in reaction to negative news surrounding the Swiss lender Credit Suisse, which, in turn, boosts the safe-haven Japanese Yen (JPY) and exerts heavy downward pressure on the USD/JPY pair. In fact, the top shareholder of the troubled Swiss bank said that it won’t provide further financial support as a bigger holding would bring additional regulatory hurdles. The development raises the risk of an eventual default by the bank and triggers a massive sell-off across the global equity markets.
The JPY draws additional support from the fact that BoJ board members debated the feasibility of making further tweaks to the bond yield control at the January policy meeting. The BoJ meeting minutes released this Wednesday also showed a general agreement among policymakers that inflation and wages could overshoot expectations, suggesting a phase-out of its massive stimulus remained on the cards. Investors, however, seem convinced that the Japanese central bank will stick to its dovish stance to support the fragile domestic economy.
It is worth recalling that the incoming BoJ Governor Kazuo Ueda recently stressed the need to maintain the ultra-loose policy settings and said that the central bank isn’t seeking a quick move away from a decade of massive easing. Apart from this, a blowout intraday US Dollar rally of over 1% helps limit losses for the USD/JPY pair, at least for now. Hence, it will be prudent to wait for some follow-through selling before positioning for an extension of the recent rejection slide from a technically significant 200-day Simple Moving Average (SMA).