Week in review

The USD/JPY opened the week at 161.90. The pair rose to around 162.50 on 13 July as the dollar started the week on a firm footing following heightened tensions in the Middle East over the weekend. Hawkish remarks by Fed Governor Christopher Waller during US trading provided further support. The pair then tumbled to a low of 161.60 after the June CPI, released on 14 July and closely watched following Waller's remarks, came in below market expectations. It rebounded after Fed Chair Kevin Warsh reiterated his resolve to tackle inflation in congressional testimony. On 15 July, the pair fell back to above 161.50 after the PPI also undershot market expectations and New York Fed President John Williams expressed optimism that inflation would ease. However, the USD/JPY then rose to a high of 162.54 on 16 July as the dollar strengthened following an improvement in initial jobless claims. At the time of writing, the pair is trading around 162.50 (Figure 1). The dollar's recent rally partially reversed this week as softer inflation data reduced expectations for further US rate hikes (Figure 2).

FIGURE 1: USD/JPY

Note: As at 13:00 JST on 17 July
Source: EBS, Refinitiv, MUFG

FIGURE 2: MAJOR CURRENCIES' RATE OF CHANGE VS USD THIS WEEK

Note: As at 13:00 JST on 17 July
Source: Bloomberg, MUFG