USD/JPY, EUR/JPY flows: Strong month for the N225 worth watching this week
Minor US data albeit still showing overall economic resilience
Some focus on any potential USD/JPY month-end hedging demand on N225 (headline) outperformance
See if it adds to temporary upside pressure into intervention zone
Minor data out the US, though at the margin US comparative resilience to date underscored by the +0.14 Chicago Fed national activity reading for Apr, strongest since Mar25 and keeping the trend on the level at +0.03. Hard to look too far from the Iran news of course for direction, Dec SOFR up around 8 ticks on the day on the back of the net-improvement in Iran hopes over the long weekend, even with the trust issues on show again overnight.
One side note, for USD/JPY this week, as well as watching the broader risk and dollar tone, it is worth keeping an eye on the month-end fix. On a headline index basis at least, Japan (N225 +10%) notably outperformed the US to date (or the S&P +3% at least), which in theory plays to possible USD/JPY positive hedge rebalancing flows. Europe was broadly on a par with the US over the month to date. USD/JPY is already compressing into the 159-160 intervention area. If there is a lift, it’s a question mark as to whether it makes sense to intervene into 'real' and temporary flow. That said, MoF sometimes does decides to tactically provide market supply, when needed, to maintain the intervention capping.