USD/JPY Dances To The Rinban Beat

USD/JPY volatility has been driven today almost entirely by two separate Bank of Japan JGB operations. One expected and one a surprise.

For some background and in layman’s terms, the Bank of Japan(BOJ) is operating a type of QE that manages the shape of the yield curve rather than indiscriminately buying bonds of any maturity. In the case, it is seeking to keep the yield curve out to 10 years at 0%. It does this by having weekly bond auctions in the 5 and 10-year tenors whereby it buys JGB’s and T-Bills from the market to keep yields at or near to 0%. This is much the same principle as the Federal Reserve did with “Operation Twist” in their QE years. In Japan, it is known as “Rinban” operations. Which in English means rotation or turn.

JGB yields had spiked in the 10-year bucket, from 0% to 0.15% in the last 24 hours. This is above the 0% target set by the BOJ. The 450 Billion Yen announced this morning disappointed the markets in its size and this saw USD/JPY open at 112.85 and then rapidly drop to 112.50.

09:11 (JP) BOJ announces amounts to buy in upcoming QE operation; Raises 5-10-yr maturity JGB purchase – To buy ¥70B in JGBs with maturity less than 1-yr – To buy ¥450B (¥410B expected) in 5-10yr JGBs, unch from ¥450B purchased on Jan 27th – To buy ¥1.00T in T-bills – Source
The effect clearly wasn’t what the BOJ was looking for, and two hours later they announced another surprise purchase operation in unlimited quantity at a yield much lower than 0.15%. Effectively in price terms (as opposed to yield) bidding through the offer.
11:37 *(JP) BOJ AGAIN CONDUCTS A FIXED-RATE JGB PURCHASE OPERATION OF UNLIMITED AMOUNTS FOR 5-10YR JGBS – BOJ offers to buy benchmark 10-yr at 0.11%**Note: This is an attempt to control yield curve and the BOJ’s 2nd time conducting this operation under its new policy framework (prior was back on Nov 16th, 2016) – Source
Looking at the hourly chart of USD/JPY below, you can see the effect (highlighted in the ellipse) was immediate. With USD/JPY immediately jumping to the day’s highs of 113.25 before settling in for the session at 113.05.


From a short-term perspective, the day’s high at 113.25 and the 100-hour d 200-hour moving average’s at 113.29 and 113.64 respectively are an initial resistance. Support sits at 112.50 and 112.05.

The daily chart shows a more bearish picture. Clearly showing how a shrinking yield differential and U.S. politics has eroded the heady dollar bullishness of a few weeks ago. Tonights Non-Farm Payrolls is almost certainly a make or break for USD bulls in the near term. We will need a blockbuster number well above 200,000 one suspects. Otherwise, the USD correction may have more to run.
Looking at the daily chart USD/JPY has moved deep into the daily Ichi-moko Cloud. Resistance is a double top at 114.00, and key support lies at 112.05 again the double bottom. Expect option related bids to be protecting knock-out options at 112.00 with the usual pile of stop losses behind. Long term support is, unsurprisingly, at 109.70/110.00 region. This contains the bottom of the Ichi-moko Cloud and the 100-day moving average.


Politics will sadly, also be a consideration. With the U.S. Administration vocally making currency manipulator noises about Japan’s QE operations unfairly devaluing the Yen. The fact that the Federal Reserve used the same playbook a few years ago and caused the USD to depreciate seems to have been lost or overlooked by them. As is the fact that the Yen is a free floating currency whose value is set by the market. (the BOJ last intervened in 2011.)
Thankfully for shorter term traders we can leave this aside and look at tonight’s Non-Farm Payrolls number, which will decide the fate of USD/JPY into early next week.



This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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