It's too soon to tell, but Trump's firing of national security adviser Bolton nW1N21902H could change trade war and geopolitical risk assessments that tend to drive the risk and U.S. rates-sensitive USD/JPY.
Bolton is seen as a very hawkish figure, so the odds seem to favor his replacement being less so, and therefore perhaps more helpful in calming market uncertainties about trade and other issues.
Until his replacement is announced and more details are known about the rationale for the change, any risk-on response will be limited.
But if the next national security adviser creates space for the administration to perhaps reduce restrictions on Huawei as part of a trade deal with China, the haven JPY would continue this month's retreat from last month's trade-driven gains.
Any sense the trade war could de-escalate would lift Treasury yields, reduce the need for Fed easing and give stocks and carry trades, some funded with cheap JPY, fresh support. Stocks, short-term U.S. yields and USD/JPY are firmer following the Bolton news.
If this initial market response proves correct, USD/JPY could clear nearby hurdles by 107.50 for a run at 108.43 and 109.32 targets .