USD/JPY: Dollar weakness stands out for now
USD/JPY is dragged lower so far today after a rise towards 111.50 yesterday despite the Fed announcing unlimited QE and unveiled unprecedented measures to backstop the US economy.
There is a sense in the market that these measures will significantly weaken the dollar and that is the reaction we are seeing among Asian investors so far today.
However, the BOJ dollar funding operations today continue to show that demand for the greenback remains strong. The operations saw a take up of $89.3 billion in dollar funding, which exceeds the previous record of $50.2 billion seen in 2008 during the financial crisis.
The 110.00 level remains key now for USD/JPY with further support from the 100-hour moving average at around 109.75 set to be the key support levels to watch out for over the next few sessions.
Notably, the pair is falling today despite a better risk mood in the market with US futures up over 3% and the Nikkei is posting gains of 6%.
It is all about the dollar trade for now so let's see if the market can decide which direction to lean on i.e. weaker dollar amid Fed measures or modest dollar strength amid funding pressures/ongoing financial dislocations.