ForexLive Asia-Pacific FX news wrap: Yen chops on BOJ rumours

• China's Central Economic Work Conference results - economic support promised, few details
• Japan chief cabinet secretary Matsuno says no plans to revise agreement with BOJ
• Chinese business confidence hit by COVID, lowest in almost 10 years
• Further reports of revisions to the BOJ target for 2% inflation
• Australian PM and Foreign Minister to travel to Beijing - invited by China
• Japan chip maker suspended work at its Beijing plant from Friday due to spread of COVID
• PBOC sets USD/ CNY reference rate for today at 6.9746
• Heads up for the People's Bank of China interest rate setting due Tuesday 20 December 2022
• PBOC is expected to set the USD/CNY reference rate at 6.9753 – Reuters estimate
• Ex_BOJ dep gov says the Bnka must be ready to adjust YCC early next year
• Japan government bonds, early stocks (Nikkei futures) lower after weekend BOJ chatter
• Elon Musk may step down as head of Twitter
• Bank of Japan December monetary policy statement due Tuesday, 20 December 2022 - preview
• Citi favours EUR/USD, EUR/GBP higher - cites supportive ECB result
• Trade ideas thread - Monday, 19 December 2022
• Weekend report on BOJ's 2% inflation target: "more flexible" (ps. not until April 2023)
• New Zealand services PMI for November 53.7 (prior 57.4)
• New Zealand Q4 Consumer Confidence hits it lowest ever
• Monday morning forex open early indications - 19 December 2022 (BOJ chatter boosting yen)
• Forexlive Americas FX news wrap: USD/JPY gives some back on soft data

Yen was a mover right from the early hours here in Asia. Over the weekend was a report in Japan’s Kyodo media that Prime Minister Kishida and his government were set to revise the 2013 joint statement with the Bank of Japan (BOJ) that commits the central bank to achieve its 2% inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term target "at the earliest date possible." Kyodo news agency cited government sources.

Note that Kishida, if this report is factual, will be discussing a new statement with the new Bank of Japan Governor who will replace current governor Kuroda when Kuroda departs his role in April of 2023.

For those unfamiliar with the early hours in Asia each Monday, wholesale FX trade pretty much kicks off with New Zealand. New Zealand is two hours ahead of the east coast of Australia (Sydney and Melbourne markets), four hours ahead of Tokyo, and five hours ahead of Singapore and Hong Kong. Liquidity Liquidity Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange marke Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange marke Read this Term in New Zealand early Monday is extremely thin and forex moves can be extended as spreads widen and (in this case) bids get slammed (in yen crosses, mainly USD/JPY at this time). USD/JPY dropped rapidly. From Friday’s NY close circa 136.70 and thereabouts, USD/JPY dropped under 136.00.

This thinly-traded ‘gap’ was then retraced over subsequent hours, USD/JPY rising back to highs circa 136.60. By then Asian markets were much more active and regular trade liquidity had returned (nervously given the wild swings early). USD/JPY has since dropped back to low around 135.80 and bounced again. The bounce from the second visit to the downside came about after Japan chief cabinet secretary Matsuno denied the reports of a renegotiation to come with the Bank of Japan. I’d humbly suggest that Matsuno is not being upfront on this, the reports of change to come from the BOJ once Kuroda’s term expires are persistent and widespread.

As an aside, the Bank is meeting Monday and Tuesday, the December policy statement is due on Tuesday, 20 December 2022 sometime around 0230 to 0330 GMT. No change to the main planks of policy is expected.

Elsewhere across major FX moves were not as wide. In general the USD has lost a little ground. Optimism on improvement to come from China’s economy added a better tone to non-USD forex. The conclusion to China's Central Economic Work Conference resulted in generic comments in state media on addressing the COVID issue in China, and economic support measures. We will get a more detailed look at what the measures will be in March of 2023.

Regional equity indexes traded down on the session. Japan's Nikkei, Hong Kong's Hang Seng and mainland China indexes all lower.

USD/JPY 10 minute candles: