Yen barely gains on a BoJ push for hikes and a Tokyo stock rout

Neither Bank of Japan (BoJ) Policy Board member Koeda's case against caution on hikes nor a near-5% fall in Tokyo stocks took USD/JPY out of its three-week range. The pair dipped to just above 157.50 twice, on her first speech and as the 10-year Treasury yield hit its low for Thursday, and is back near 158.00.

Policy Board member Koeda said in Kumamoto that the BoJ shouldn't become overly cautious about raising its 1.25% rate while financial conditions stay loose. She listed a weaker Yen that has been less of a safe haven among the risks pushing prices up, with underlying inflation becoming anchored around 2%. If the rest of the board agrees, the Japanese side of USD/JPY's rate gap has further to rise.

Tokyo's Nikkei 225 fell 4.9%, its third-largest point drop on record, as the selling in artificial intelligence stocks reached Japan's chipmakers. The Yen may still be a safe haven, but on Thursday it gained less on the Dollar than the Euro or the Pound and lost ground to both.

On the calendar

On Friday at 03:30 GMT, Fed Chair Warsh appears in Bangkok. US industrial output for September is due at 13:15 GMT, with a 0.4% rise forecast after a flat August. Both reach USD/JPY through the 10-year yield, which the pair followed to its second low of Thursday.

Japan's September trade figures come out at 23:50 GMT on Tuesday, October 20, and August's showed exports up 19.3% from a year earlier. National inflation follows at 23:30 GMT on Thursday, October 22, after 1.9% in August, close to the 2% Policy Board member Koeda says underlying inflation is anchoring at. Both are out before the BoJ decides on October 30.

On the charts

USD/JPY has traded between roughly 156.50 and 159.00 since September 24, after a climb from below 153.00 on September 8. Thursday's bar spans both the 50-day Exponential Moving Average (EMA) and the 200-day EMA, which have narrowed to about a quarter of a yen apart.

USD/JPY daily chart