[MARKET ANALYSIS] DXY flat into US PPI, USD/JPY subject to volatile activity as jawboning picks up

G10s are mixed against the flat USD. EUR and GBP both hold steady, whilst the Antipodeans are the slight underperformers, given the risk tone. However, the risk tone is not quite displayed fully, with the typical havens ( CHF and JPY) also posting mild losses this morning. DXY trades within a 103.05-103.23 range and is set to end the week firmer by c. 1.5%. The index caught a bid earlier in the week following hawkish commentary from the Fed’s Waller, who indicated his openness to a 50bps hike; the subsequent hotter-than-expected CPI report also helped DXY move higher. The days following were a bit more quiet from a US-standpoint, but the geopolitical environment remained volatile. The US-Russia-Ukraine talks yielded no significant progress (but were touted to be productive), whilst Iranian officials warned that distant US bases could become a target should they attack Tehran again. Next up for the USD will be the US PPI report (13:30 GMT), which will help forecasters in predicting the PCE report due later this month. Also on the agenda are a few Fed speakers, dotted throughout the day. Since Waller, none of his colleagues have expressed their openness to a larger 50bps hike in December; markets will await whether anyone else will join him. The week has also seen USD/JPY breach beyond the 160.00 mark, with the pair up 1.2% WTD. Pressure in the JPY was largely attributed to this week’s USD strength, and the subsequent widening of yield differentials between the Fed and BoJ. The latest leg higher in the pair has brought some Japanese officials out of the woodwork, to offer some renewed verbal intervention – albeit to no avail. Yesterday, top currency diplomat Mimura mentioned that the JPY’s recent fall is too rapid, reminding the market of the aggressive action taken in the summer. Today, Japanese PM Takaichi said that they are in close contact with the US authorities regarding FX, whilst Finance Minister Katayama explicitly mentioned that they are seeing one-sided and rapid FX moves and will communicate with the US Treasury accordingly. Jawboning which ultimately failed to push the USD/JPY back lower. An interesting move was seen today at around 06:30 London time, which saw the pair get whacked from above the 160.00 level to the mid 159.00 mark. Traders may speculate that this was the MoF/BoJ defending the level to some small degree.