USD/JPY: dip-buying demand should be stronger toward 108 - Nomura

Aheda of the BoJ tonight, analysts at Nomura explained that the BOJ reduced the size of its 3-5yr JGB purchases today, as expected.

Key Quotes:

"This is the first tapering since 1 June."

"The amount purchased was reduced to JPY300bn from JPY330bn per auction, and the amount is now in the middle of the range shown in the monthly calendar (JPY250-350bn)."

"FX and rates market reactions were muted again."

"We will keep monitoring any changes in the correlation between rates and FX, and as long as the level of the correlation is maintained, downside risks to USD/JPY should be limited."

"Fed communications yesterday were unsurprising, but the market will likely price more rate hikes gradually, supporting USD/JPY, while Japanese dip-buying demand should be stronger toward 108."