USD/JPY plummets from multi-year highs above 135.00 towards 134.20s ahead of Fed’s decision By christianborjon USDJPY Majors Macroeconomics Fed BOJ
FX market emerged last Friday. At 134.18, the USD/JPY retreated from daily highs at around 135.19, despìte US Treasury yields extending their gains towards multi-year highs.Global equities remain under pressure as investors assess the almost 9% inflation in the US. Negative sentiment favors safe-haven peers and, in the case of the USD/JPY, the yen.
In the meantime, the US Dollar Index, a gauge of the buck’s value against its peers, is advancing 0.64% at 104.857 after reaching a 20-year high at around 105.065. Central bank divergence between the Fed and the BoJ’s had been the main drivers of the USD/JPY in the year. Also, the positiveof the pair with the US 10-year Treasury yield triggered a USD/JPY rally, from 116.00 to 135.00.
Earlier, the short-end of the yield curve, the 2s-10s, inverted during the day on concerns that a higher Federal Funds Rate might trigger a recession, as the US central bank battles inflation readings near 9%, not seen since 1981. Also, it is worth noting that some Wall Street’sbanks increased their calls for a potential 75 bps increase, even a 100 bps increase.
Reflection of the aforementioned is the US 10-year benchmark note rate, up at 3.343%, gaining almost 20 bps.A busy US economic docket would keep USD/JPY traders entertained. On Tuesday, the Federal Reserve June meeting begins, and on Wednesday, they will unveil its decision. Later on, the Fed ChairMeanwhile, the Japanese docket would feature the Industrial Production, Machinery Orders, and the Balance of Trade.
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