US stocks see mild gains, Yen surges, dollar dumps after BoJ surprise

The yen jumped to a four-month high against the U.S. dollar, on pace for its biggest one-day rise in 24 years, on Tuesday after the Bank of Japan stunned markets with a surprise tweak to its bond yield control program. US Dow futures were down over 250 points in the pre-market but after an impressive come back the Dow eked out a 92 point gain (+0.28%).

A notable mover on in the US stock market last week was Tesla (TSLA) tumbling over 7% to its lowest level since November 2020 (down 6 of the last 7 sessions and 10 of the last 12)

BoJ action

The big news of the day was the unexpected adjustment by the Bank of Japan to their Yield Curve Control (YCC) mechanism. Previously the yield on 10-year JGB bonds was allowed to fluctuate from -0.25% – 0.25%, this meant the BoJ was continuously intervening in the bond market to hold this band, printing money to buy their own bonds in basic terms, this has been a major reason that the Yen has been so weak in 2022. In Tuesdays scheduled meeting the BoJ announced a widening of this band to -0.50% – 0.50%, the market took this to mean that the BoJ would now need to intervene less (less money printing) and subsequently the Yen surged, having its biggest positive move against the USD since 1998.

JGB yields jumped higher with the 10 year up 15bps to its highest level since 2015, the biggest daily rise in yields since 2003.

The move rattled investors already worried about the economic fallout of rising interest rates and untameable inflation around the globe. This move in the Yen also saw the USD take a hit, with gold capitalising, surging back above $1800 and looking to test the resistance high of 1825 that was set earlier in the month.

Bitcoin spiked on the BoJ news, then spiked again as the cash equity market breaking back above 17000 before pulling back somewhat.

In economic release ahead in last weeks session, the Canadian CPI figure and US consumer confidence will headline, though with both US and Canadian Central banks out of action until February little impact is expected from either figure.