USD/JPY has decoupled from the risk trade in the last few hours, holding well above session lows despite forays to the downside in stocks and commodities.
US 2-year notes have decoupled as well, firming to about 0.85 bp today as compared to dips below 0.80 bp earlier in the week despite several outbreaks of risk aversion today. There is a very strong correlation between the 2-year note yield and USD/JPY, so traders seem reluctant to short-USD/JPY until US yields move lower.
As noted earlier today, Toyota’s manufacturing woes could help slow the supply of USD/JPY as they suspend sales of 8 high volume models. That could be helping underpin USD/JPY to a modest extent.
USD/JPY trades now at 89.50 after dipping to 89.15 earlier in the day. Offers are seen in the 89.65/75 region but short-covering is expected if 89.80 is overcome.
