USD/JPY: Attention turns to FOMC – MUFG

The USD/JPY opened the week at 157.57, with Dollar selling early in the week due to rising tensions between the US and Europe. The pair recovered to around 158, driven by overseas investor interest and rising yields. Following a press conference by Japan's Finance Minister, the USD/JPY rose above 159 after the BOJ revised its inflation outlook. MUFG's Tokyo Head of Global Markets Research Teppei Ino notes.

Market dynamics and recent movements

"Dollar selling led early in the week after tensions between the US and Europe intensified over Greenland, pushing the pair down to 157.44. However, risk-off yen buying did not persist, and the USD/JPY recovered to around 158."

"The USD/JPY rose to around 158.50 as overseas investors entered the market on 21 January. This was driven by a sharp rise in yields after supply-demand conditions in the bond market deteriorated following Prime Minister Sanae Takaichi's press conference on the evening of 20 January."

"The pair then briefly fell back to around 157.50 after US Treasury Secretary Scott Bessent and Japan's Finance Minister Satsuki Katayama repeatedly called for calm in financial markets, before settling around 158."

"The BOJ left policy rates unchanged and revised up its inflation outlook on 23 January, but yen selling during Governor Kazuo Ueda's post-meeting press conference drove the USD/JPY above 159."

"The pair then fell sharply to around 157.50 immediately after the press conference, before rebounding to below 158.50 shortly thereafter amid volatile trading."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)