US Dollar To Japanese Yen (USD/JPY) Gained A Lot, Bank Of Japan Is Said Not To Act Until Inflation Reaches 2% | Oanda

Rising U.S. Treasury Bond Yields Have Helped The USD/JPY Bulls

The Japanese yen has started the week quietly. In the European session, USD/JPY is trading at 130.63, up 0.15% on the day.

It was a week to forget for the yen, as USD/JPY surged 2.91%, the biggest weekly gain this year. The driver of the yen’s downswing was primarily the rise in US bond yields, which have started the week with gains and are closing in on the 3% level.

US yields climbed on Friday after the May nonfarm payrolls were stronger than expected. The economy added 390 thousand jobs, above the forecast of 325 thousand and indicating that the labour market remains robust. The report has solidified expectations that the Fed will deliver 50-bps hikes at the June and July meetings.

Ahead of the NFP release, Fed members were sending out hawkish messages to the markets. On Thursday, Fed Vice Chair Brainard said the Fed should not take a break from rate hikes in September, and that the Fed might continue with 50-bps hikes if inflation doesn’t peak. What makes Brainard’s comments noteworthy is that she is considered a leading dove on the Fed, which is indicative of the hawkish pivot the Fed has taken as inflation continues to accelerate. Echoing Brainard, Fed member Mester said that the Fed had to act aggressively to contain inflation and that could mean an increase in September.


BoJ’s Kuroda dismisses tightening

With the Japanese yen declining in health and trading above 130 to the dollar, there has been talk that the BoJ might intervene in order to prop up the currency. BoJ Governor Kuroda poured cold water on any such expectations on Monday, stating that monetary tightening was not “suitable”. Kuroda said that the economy was still recovering from Covid and high commodity prices were adding pressure on the economy. He added that the BoJ would adhere to its ultra-loose policy until the Bank achieved its inflation target of 2%.

With Kuroda doubling down on the Bank’s accommodative policy, the risk for the yen is clearly tilted to the downside, barring a decline in US Treasury yields.

USD/JPY Technical

  • USD/JPY faces resistance at 1.3124 and 1.3226
  • There is support at 129.56 and 128.14

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Rising U.S. Treasury Bond Yields Have Helped The USD/JPY Bulls

Jeffrey Halley

With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is 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, Channel News Asia as well as in leading print publications including 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.