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USD/JPY reaches a 24-year high above 145.50 despite weakness in Japan and the U.S.
The USD/JPY exhibits a four-day rally as buyers challenge September's multi-year high. US 10-year Treasury rates increased for the eighth consecutive week due to a stronger US employment report and hawkish Fed forecasts. BOJ intervention and challenges for hawkish central banks are ineffective in taming bull markets. US CPI and FOMC Minutes will be essential in determining further yen gains.
USD/JPY stays bullish near 145.50, touching the 24-year high recorded in late September during Monday's Asian trading session. Recent advances in the yen-dollar pair may be related to the dollar's general uptrend, despite the fact that holidays in Japan and the United States pose a hurdle for momentum traders.
In spite of this, the US Dollar Index (DXY) has risen over the past three days, reversing the previous week's decline from the 20-year high, as markets have priced in 75 basis points (bps) of a Fed rate hike. Behind the Fed's hawkish bets could be the stronger US jobs report and the policymakers' optimistic sentiments, which anticipate additional rate hikes before the pause.
Nonfarm Payrolls (NFP) surged to 265K instead of the predicted 250K, which boosted the DXY on Friday following the September jobs report. The surprising decline in the unemployment rate from 3.7% to 3.5% also bolstered the U.S. dollar index, although analysts had predicted no change.
Fears of a recession and the intensifying geopolitical conflict between Russia and Ukraine also influence the market US Treasury yields and the USD/JPY exchange rate. Notable is the fact that 10-year US Treasury yields rose for eight consecutive weeks before to stabilizing around 3.90 percent. Wall Street and S&P 500 Futures were negatively impacted by the firmer yields.
It should be highlighted that the Bank of Japan's (BOJ) frequent bond purchases fail to challenge USD/JPY sellers, as the Japanese central bank continues to defend its cheap money policy, in contrast to the Fed's hawkish rhetoric.
Moving forward, today's holidays in the United States and Japan may offer minimal impetus to USD/JPY buyers, but the market's rush toward risk aversion is expected to favor upward price action. Even so, the Federal Open Market Committee (FOMC) Minutes on Wednesday and the US Consumer Price Index (CPI) on Thursday will be critical for near-term direction.
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