The JPY found brief support on the Moody’s JGB ratings announcement, which unexpectedly upgraded its domestic currency bond rating from Aa3. However, the agency still lowered its rating for Japan’s foreign currency bonds, which unifies the local and foreign JGBs at Aa2, and there has been limited market impact. Moody’s also affirmed that Japanese bank ratings will not be affected. A Nikkei newspaper report had earlier caused speculation of a sovereign downgrade, which had supported USD/JPY earlier in the Tokyo session, though the speculation proved to be unfounded. USD/JPY has now settled around the 95.00 level after earlier making a near two-month low at 94.52 (before the rumors about Moody’s started). The backdrop of rekindled risk caution has been supporting the JPY, while the rebound in Japanese consumer confidence, reported earlier, may have also helped the currency. In USD/JPY, a mix of sellers and stops which were triggered in the 95.50-96.00 area, with buying interest noted from 94.50, with stops below. Ahead this week, Japan’s Q1 GDP data on Wednesday is expected to reveal another sharp contraction.
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