Week in review
The USD/JPY opened at 144.77 on 8 January, which was a holiday in Japan. The pair remained directionless in Asian trading hours, but sank below 144 as the dollar weakened in US trading hours due to a decline in oil prices and after the NY Fed announced a fall in inflation expectations. The USD/JPY fell to a weekly low of 143.43 on the morning of 9 January after Japanese investors returned to the market. However, the dollar subsequently firmed up and the USD/JPY rebounded as long-term UST yields became entrenched at the 4.0% level. The pair clipped higher on 10 January amid yen selling in the Tokyo session and rose to above 145.50 after overseas players entered the market, with cross yen rates centered on the euro rising. The USD/JPY softened somewhat on the morning of 11 January and was trading around 145.50 before rising sharply after the US CPI for December, announced in US trading hours, beat market expectations. It recovered to above 146 for the first time in about a month. However, market participants did not abandon expectations of a rate cut by the Fed, and UST yields fell, curbing the dollar's strength. The USD/JPY fell to below 145.50, and briefly broke below 145 before the writing of this report on 12 January (Figure 1).
The dollar's strength since the start of the year halted this week. However, the yen remains in the doldrums, and has been the weakest performer among G10 currencies since the start of the year (Figure 2).
FIGURE 1: USD/JPY
Note: Through 11:00am JST on 22 December
Source: EBS, Refinitiv, MUFG
FIGURE 2: MAJOR CURRENCIES' RATE OF CHANGE VS USD THIS WEEK
Note: Through 11:00am JST on 22 December
Source: Bloomberg, MUFG
