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Examining the Tokyo pre-fixing flows over the past two days; it seems there was a subtle nudge from higher-ups, as banks might have received hints from well-placed sources about a potential hawkish move from the BoJ. The price action in Tokyo has become as telling as a rate check for those paying attention. Previously, we’d rely on insider tips from Tokyo City bank traders, but now we’re reading the market signals directly from the price movements.

Meanwhile, the global risk-off sentiment persists, driven by US election uncertainty, disappointing tech earnings, and new signs of weakness in global growth. This shift has led to a quick retreat from long-held carry trades, helping towards an outsized overnight gain for the JPY.

Despite a notable decline in the US economic surprise index, the outlook for the US economy remains relatively strong compared to global peers, keeping the US dollar robust across the G-10 currencies. Meanwhile, several Asian currencies have gained from the drop in USDJPY, with the CNH contributing positively to the local base. However, the ongoing weakness in stock markets doesn’t offer a strong incentive to invest in Asian currencies yet.

Another critical yet under-the-radar issue is the GPIF’s upcoming rebalancing in April 2025. They’ll unlikely watch USDJPY drop below 150 without taking preemptive action. While the forward market conditions may not be perfect, expect them to start positioning early to mitigate any potential negative revenue repatriation impacts from a stronger Yen.

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