Market Rumours

1-month ATM USD/JPY implied volatilities continue to fall to 10.65%/11.35% vs 10.80%/11.50% in NY as USD/JPY's rise overnight to two-week high somewhat eases demand for downside protection vs USD/JPY; but before FOMC meeting next week, USD/JPY expected to remain range-bound, so volatilities also unlikely to climb sharply until release of meeting results, option dealer in Tokyo says. Says, however, there is slight possibility volatilities may rise if JPY strengthens due to profit repatriation by Japanese companies ahead of March-FY-end. Eyes one-month at-the-money dollar/yen straddle contract with implied volatility of 10.95%.

EUR/JPY, EUR/USD in brief slip with some selling after weaker-than-expected headline number on Australian jobs data, says Japan bank trader; EUR though now largely back where it was before data, and AUD has also recovered from a small, short decline, with some reassured in Australia by a large rise in full-time employment in February. Trader says EUR may be getting some sellers in Asian hours after its gains in NY; puts EUR/JPY support at 122.80 vs 123.44 now, EUR/USD cushion at 1.3590 vs 1.3646. Exporters selling USD/JPY around 90.50 after it reached 2-week high overnight; but "because speculation about further loosening from the BOJ is being a bottleneck, the speed" of JPY gains will be limited. USD/JPY now 90.48.

Japan 4Q GDP revised lower to annualized +3.8% vs preliminary estimate of +4.6%, but "the fact that capex wasn't revised down that much eases concerns over the growth rate in the January-March period," says Nikko Cordial Securities chief market economist Mari Iwashita; capex +0.9% vs preliminary +1.0%. Says downward revision not suggesting domestic economy will fall into double-dip recession this year, as these revisions were only moderate and deflator revised slightly upward to minus 2.8% vs preliminary minus 3.0%. Market impact from data limited as results within expectations; USD/JPY last at 90.46.