Related Insights
USD/JPY retreated below the 160 handle. USD/JPY has retreated from its recent highs, falling back below the psychologically significant 160 level. After breaching 160 during the late US session last Friday and peaking at 160.46 during Monday’s early Asian session, the pair tumbled to a low of 159.33 by the late European session. This reversal was driven by a triple threat of verbal intervention, shifting Bank of Japan expectations, and a cooling of US Treasury yields.
First, Japanese authorities have intensified their unified warnings against "disorderly" market moves. Vice Finance Minister for International Affairs Atsushi Mimura reinforced Finance Minister Satsuki Katayama’s recent stance, cautioning that "decisive action" may be taken to curb speculative activity. Notably, the warnings extended beyond the foreign exchange market to include crude oil futures, signalling a broader concern over imported inflation and speculative volatility. Unfortunately, global oil prices are beyond the control of Japanese policymakers.
Second, BOF Governor Kazuo Ueda emphasized the profound impact of the JPY’s excessive depreciation on the pass-through effect to prices. Given the positive wage negotiations by Shunto and Rengo, the markets aggressively repriced the upcoming April 28 policy meeting, with the implied probability of a rate hike rising from 69.5% to 84.6%.
Third, the US 10Y Treasury yield eased by 8 bps to 4.35%, retracing its climb to 4.43% the previous week, providing the JPY with breathing room to recover. Fed Chair Jerome Powell contributed to the softening in US bond yields by noting that US long-term inflation expectations remain well-anchored, specifically citing the stability of the 5Y-5Y forward breakeven rate. Powell also mitigated risk-off sentiment by playing down concerns regarding private credit contagion within the broader banking sector. San Francisco Fed President John Williams acknowledged that oil disruptions are a double-edged sword, temporarily lifting inflation while dampening economic activity. Hence, markets are looking for the US Conference Board to report today, that consumer confidence has dropped, weighed down by lower stock markets and companies moving to a “low hire, low fire” stance. 
However, the JPY is not out of the woods yet. Japan is a net energy importer, and the ongoing US-Israel-Iran conflict (now in its fifth week) has kept crude oil prices elevated. Higher oil prices drive the creation of an organic JPY supply as Japanese importers sell yen for dollars to settle energy contracts. Until there is a definitive de-escalation in the Middle East or a more aggressive, sustained tightening path from the BOJ, the path of least resistance for USD/JPY remains tilted to the upside, specifically to July 2024’s high of 162.
Quote of the Day
“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.”
Sun Tzu
March 31 in history
The Eiffel Tower was officially opened in 1889.
Topic
GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates, Digital Assets or Commodities)[1]
The information herein is published by DBS Bank Ltd and/or DBS Bank (Hong Kong) Limited (each and/or collectively, the “Company”). It is based on information obtained from sources believed to be reliable, but the Company does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. The information herein is published for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Company, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Company or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Company and its associates, their directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking or financial services for these companies. The information herein is not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident of or located in any locality, state, country, or other jurisdiction (including but not limited to citizens or residents of the United States of America) where such distribution, publication, availability or use would be contrary to law or regulation. The information is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction (including but not limited to the United States of America) where such an offer or solicitation would be contrary to law or regulation.
[#for Distribution in Singapore] This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) which is Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 65-6878-8888 for matters arising from, or in connection with the report.
DBS Bank Ltd., 12 Marina Boulevard, Marina Bay Financial Centre Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E.
DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
DBS Bank (Hong Kong) Limited, a company incorporated in Hong Kong with limited liability. 11th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong SAR.
[1] This disclaimer may not apply if the applicable assets fall within the definition of 'financial instruments' that are set out in Article 2(1) EU MAR (e.g. financial instruments that are traded on a regulated market, MTF or OTF, etc.). Section C of Annex I of MiFID2 specifies these 'financial instruments'.