Week in review

The USD/JPY opened the week at 162.53. The pair traded without clear direction below 162.50 on 20 July, when Japanese markets were closed for a holiday. It remained broadly flat during Tokyo trading on 21 July before the dollar strengthened as European participants entered the market, pushing the pair above 163. The pair became top-heavy in the low 163 range, and reports on 22 July that the BOJ could accelerate its rate hikes briefly pushed it back below 163. However, higher crude oil futures amid escalating tensions in the Middle East left underlying dollar-buying and yen-selling pressure intact. The pair accelerated higher again during overseas trading on 23 July and approached 164. The US Treasury's Foreign Exchange Report described the yen as substantially undervalued, but the market reaction was limited. At the time of writing, the pair was trading above 163.50 (Figure 1). G10 currency markets have been characterized this week by rising oil prices amid escalating tensions in the Middle East, a stronger dollar as expectations of further US rate hikes increased, and gains in commodity currencies (Figure 2).

FIGURE 1: USD/JPY

Note: As at 14:00 JST on 24 July
Source: EBS, Refinitiv, MUFG

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

Note: As at 14:00 JST on 24 July
Source: Bloomberg, MUFG