JPY is unexpectedly underperforming on the day - Scotiabank

The Japanese Yen (JPY) is weak, down a sizeable 1.2% vs. the US Dollar (USD) and hitting fresh local lows while threatening a push to levels last seen in early April, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret note.

Market remain concerned about BoJ dedication to normalization

"The JPY's underperformance is notable, in an environment of risk aversion in which its haven peer CHF is showing impressive relative gains and a modest decline of only 0.1% vs. the USD."

"The outlook for relative central bank policy may be adding to risk and terms-of-trade related weakness, as market participants appear to have underlying concerns about the BoJ's willingness to deliver on its plans for policy normalization."

"The latest BoJ meeting offered a less aggressive path for balance sheet normalization, and market participants may be extending this risk to the rate path as well. In terms of data, the PMI's showed improvement with the mfg index pushing just above 50 and the services climbing to 51.5."