The yen surged more than 2% higher against the dollar, euro and sterling after comments from BOJ Governor Kazuo Ueda ignited speculation about tighter Japanese monetary policy, dislodging hefty short yen trades amid ongoing discounting of ECB, Fed and BoE rate cuts next year.
Ueda's discussion of policy made a rate hike sound as if it were a fait accompli, whenever it may come.
USD/JPY's plunge began with a dive below its uptrend line from March and Fibo support by December's prior low at 146.235, which then claimed the 50% and 61.8% Fibos of the July-November rise to 32-year highs, with the 141.60 EBS low looking like a fat-finger.
A close below 142.50, particularly if it comes after Friday's payrolls report, could see half of 2023's uptrend erased.
EUR/USD rose 0.4% in choppy trade amid the fallout from the yen's surge and mixed U.S. data.
EUR/JPY's 2% tumble has more speculative fuel to burn due to hefty IMM euro longs and yen shorts that were based on ECB and BoJ policy divergence that is now rapidly converging.
For EUR/USD, Thursday's hiatus from the recent selloff now faces Friday's the U.S. jobs event risk and recalibration of whether the six ECB cuts and five Fed cuts largely priced in for 2024 are too aggressive or too timid.
Fed cut pricing may need soft jobs and CPI data to be sustained, but Treasury yields were slightly lower.
Sterling rose 0.25% in the wake of USD/JPY's collapse and as rapid expected Fed rate cuts get weighed against the more delayed and diminutive BoE cuts futures imply.
Risk-sensitive pound also helped by U.S. equity gains.
Aussie reversed earlier losses and rose about 0.9% as Treasury yields slipped and stocks climbed to help the risk proxy.
That as USD/CAD was flat and in the same boat as the dollar.
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