Week in review
The USD/JPY opened the week at 156.84. The dollar strength following the US payrolls report on 7 June continued through the start of the week on 10 June, although its momentum weakened. In European trading hours, yen cross rates declined as the euro was sold following the EU elections, which worked to dampen USD/JPY upside. However, this did not become a turning point and the USD/JPY rose to above 157. In European trading hours on 11 June, the USD/JPY fell below 157 led by a decline in the EUR/JPY due to speculation that French President Emmanuel Macron would resign, but it rose to around 157.50 on 12 June following the US CPI announcement and ahead of the FOMC. The CPI for May was overall weaker than the market had forecast, and the dollar weakened across-the-board as a result. The USD/JPY plummeted to the upper 155 level as the market waited on the FOMC. The highly anticipated dot plot showing the median federal funds rate forecast of FOMC participants pointed to just one rate cut for the year, down from the projection of three cuts in the March dot plot. The dollar rose steeply in response and Fed Chair Jay Powell's subsequent press conference contained nothing to dispel the hawkish impression. The dollar continued to strengthen, and the USD/JPY rose to above 156.50 in trading on 12 June. The yen was sold on 13 June in the Tokyo session as dollar strength following the FOMC meeting receded. The USD/JPY rose to the low 157 level along with a rise in yen cross rates. However, upside was curbed after the US PPI fell short of market expectations, or perhaps because the dollar strengthened against other currencies, primarily the euro. On 14 June, the BOJ's statement on monetary policy showed that the Bank had decided to reduce the amount of its JGB purchases, as had been expected, but said detailed plans for the move would be decided at the next meeting. This was seen as dovish, and the USD/JPY quickly rose to above 157.50. The pair rose to above 158 ahead of Governor Kazuo Ueda's press conference but fell back during the conference as Ueda's comments worked to dispel the dovish impression left by the statement. The USD/JPY had fallen below 157.50 at the time of writing this report (Figure 1). Dollar strength following the US payrolls report has receded somewhat, with the dollar softening over the week (Figure 2).
FIGURE 1: USD/JPY
Note: Through 14:00 JST on 14 June
Source: EBS, Refinitiv, MUFG
FIGURE 2: MAJOR CURRENCIES' RATE OF CHANGE VS USD THIS WEEK
Note: Through 14:00 JST on 14 June
Source: Bloomberg, MUFG
