USD/JPY collapses to test 114 the figure, 113.99 traded By ross_burland USDJPY Fed Currencies
ed down along with US yields as markets think twice about a faster pace of tapering by the Federal Reserve and wonder if they have priced the Fed too hawkishly.
Harker said he sees the Fed starting to shrink its balance sheet “in late 2022 or early 2023” after the central bank has raised its target rate sufficiently, to around 1 per cent from near zero. Meanwhile, Powell has said that the central bank could start to shrink its balance sheet later this year.
"At some point, perhaps later this year, we will start to allow the balance sheet to run off, and that's just the road to normalising policy," he said, adding the US economy "no longer needs or wants" the Fed's very highly accommodative policies.. "There is a risk inflation is likely to be elevated for an extended period of time and we need to respond directly, clearly and aggressively," Bostic told Reuters in an interview on Monday.
The mixed messages from the Fed is making for a varied response in the markets at the start of this year. Initially, the US dollar was on the front foot along with US yields. The 10-year yield rallied to 1.8080% but it has since fallen to 1.7110%. Today, the yield is steeply lower again but above yesterday's aforementioned low. Nevertheless, USD/JPY is on the backfoot and will likely remain so until yields begin to stabilise again.
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