USD/JPY: Yen weakness seen prevailing after a rate hike
Week in review
The USD/JPY opened the week at 155.31. The pair dipped to this week's low of 154.91 in early Tokyo trading on 8 December, then moved into a yen-selling tone in the absence of clear catalysts. The USD/JPY climbed to around 156 overnight as expectations of a BOJ rate hike receded following an earthquake in Aomori late that night. The yen was bought briefly following an interview with BOJ Governor Kazuo Ueda on 9 December, but the broader yen-weakening trend persisted. The USD/JPY rose to 156.96 as the dollar strengthened after US job openings for September and October exceeded market expectations. The pair became top-heavy around that level ahead of the FOMC outcome, then edged lower during US trading on 10 December amid mild dollar selling. The FOMC delivered a 25bp rate cut as expected, but the USD/JPY rebounded briefly because the statement was seen as hawkish after it hinted at a pause at the next meeting. However, the pair then fell to around 155.50 into Tokyo trading on 11 December after Fed Chair Jay Powell's press conference was interpreted as dovish, particularly because he referred to downside risks in the labor market. The pair recovered to around 156, then retested the 154 level after dollar selling resumed on weaker US initial jobless claims. However, the USD/JPY found support around 155 and was trading around 155.50 at the time of writing on 12 December (Figure 1). Both the dollar and the yen weakened among G10 currencies this week. Gains in cross-yen pairs stood out after the Reserve Bank of Australia suggested it is nearing the end of its rate-cut cycle (Figure 2).
FIGURE 1: USD/JPY
Note: As at 14:00 JST on 12 December
Source: EBS, Refinitiv, MUFG
FIGURE 2: MAJOR CURRENCIES' RATE OF CHANGE VS USD THIS WEEK
Note: As at 14:00 JST on 12 December
Source: Bloomberg, MUFG