Week in review
The USD/JPY opened the week at 153.44. It traded above 153.50 in the absence of notable catalysts on Monday 16 December, then rose to around 154.50 as the dollar strengthened after the US services PMI beat market expectations. The pair became top-heavy on 17 December ahead of the FOMC and BOJ monetary policy meetings. US retail sales for November exceeded the market's forecast, but industrial production unexpectedly declined and the USD/JPY fell to a low for the week of 153.17. The pair rose gradually from the Tokyo session through to European trading hours on 18 December, and almost hit 155 as the dollar strengthened across the board following the FOMC meeting result. It pushed past 155 after the BOJ announced it would keep rates on hold around noon JST on 19 December. The market briefly switched to wait-and-see mode ahead of BOJ Governor Kazuo Ueda's press conference, but yen selling accelerated during his press conference, which was seen as dovish overall. Continued yen selling after the press conference drove the USD/JPY above 156 and then quickly beyond 157. The pair rose past 157.50 in US trading hours with the dollar strengthening as the 10y UST yield approached 4.60%. The USD/JPY tested 158 early in the Tokyo session on 20 December, prompting Finance Minister Katsunobu Kato and Vice Finance Minister for International Affairs Atsushi Mimura to express concerns about exchange rates. This worked to briefly curb yen selling, and the USD/JPY temporarily fell below 157 at the time of writing this report (Figure 1).
FIGURE 1: USD/JPY
Note: Through 14:00 JST on 20 December
Source: EBS, Refinitiv, MUFG
FIGURE 2: MAJOR CURRENCIES' RATE OF CHANGE VS USD THIS WEEK
Note: Through 14:00 JST on 20 December
Source: Bloomberg, MUFG
