USD/JPY: Post-election themes come into focus
Week in review
The USD/JPY opened the week at 155.19. Yen selling carried over on 2 February after Prime Minister Sanae Takaichi's weekend speech was interpreted as tolerating further yen weakness. The pair pushed above 155.50 during US hours after the ISM manufacturing index surprised to the upside. On 3 February, the USD/JPY was top-heavy during Tokyo trading hours following cautionary remarks from Finance Minister Satsuki Katayama, but rising US yields drove the pair above 156. Yen selling gained traction on 4 February after crude prices came under upward pressure amid heightened tensions in the Middle East, lifting the USD/JPY through the European session to just below 157. The USD/JPY reached a weekly high of 157.34 during European trading on 5 February after the ISM non-manufacturing index beat expectations and markets reacted positively to a phone call between the US and Chinese leaders. However, upside was capped after US initial jobless claims rose unexpectedly and December JOLTS job openings fell sharply, prompting a shift toward risk aversion. The USD/JPY had eased back to above 156.50 as of the time of writing on 6 February (Figure 1). The dollar strengthened across the board against G10 currencies this week. The Australian dollar was relative strong after the RBA delivered its first rate hike in three years. The AUD/JPY briefly reached above 110, its highest level since October 1990 (Figure 2).
FIGURE 1: USD/JPY
Note: As at 13:00 JST on 6 February
Source: EBS, Refinitiv, MUFG
FIGURE 2: MAJOR CURRENCIES' RATE OF CHANGE VS USD THIS WEEK
Note: As at 13:00 JST on 6 February
Source: Bloomberg, MUFG