USD/JPY: Firmly in the red as risk-off persists

• G10 FX markets remain lively and the yen was bid on falling stocks.
• Bank of Japan will increase its asset purchases, but fiscal stimulus is key.

USD/JPY is trading a 105.95 having dropped within a range of 107.56 to a low of 105.14 as markets drop to the lowest levels since Dec 2018, despite all of the stimulus from a coordinated effort of some of the world's central banks yesterday. 

• DXY to be driven by relatively monetary policy – CitiBank

Global markets started the trading week firmly in the red

G10 FX markets remain lively, today's video conference among G7 leaders did little to calm the nerves. Global markets started the trading week firmly in the red, with US equities making fresh 2020 lows and the S&P once again tripping a market-wide circuit breaker. 

"Liquidity in financial markets has evaporated, prompting the Fed to conduct a second overnight repo operation with a maximum amount of USD500bn. The EU is planning on temporarily lifting state aid rules so that unprecedented levels of liquidity can be pumped into the economy," analysts at ANZ Bank explained. 

Meanwhile, the US 10-year yield had fallen 22.3bps to 73.7bps and Bund yields rose 8.2bps to -46.9 ps. The yen is gaining on risk-off flows and the Bank of Japan will increase its asset purchases, including doubling ETF purchases.

However, investors are clearly looking for fiscal policy to respond with the same urgency central banks displayed over the weekend. The Eurogroup held an in-depth discussion today, together with non-Euro Area Members, on how to respond to the extraordinary human and economic crisis caused by the Coronavirus.  "We will take whatever further coordinated and decisive policy action is necessary, including fiscal measures, to support growth and employment," the Eurogroup said. See here for the full statement. 

USD/JPY levels

• USD/JPY Forecast: Yen swings alongside risk sentiment