The USD/JPY opened the week at 155.88. The pair fell below 155 during Tokyo trading on 15 December after comments by Chief Cabinet Secretary Minoru Kihara were taken as accepting a rate hike. The USD/JPY then saw a modest rebound on dollar buying linked to reports surrounding the Fed chair succession, before trending weaker into 16 December. The pair extended its decline to the low for the week of 154.40 after US employment data and retail sales released during US trading came in below market expectations. The USD/JPY rose back above 155 on 17 December after UST yields rose and the dollar strengthened, then continued to push higher to around 155.50. The pair dipped briefly in early Tokyo trading on 18 December, although the upward trend persisted and carried the USD/JPY to 155.98 during European trading. The pair fell sharply to below 155.50 after US CPI came in well below market expectations, then rebounded as some market participants questioned the reliability of the data due to the impact of the partial government shutdown. The USD/JPY rose past 156 on 19 December after the BOJ announced its policy decision, then rose further following BOJ Governor Kazuo Ueda’s press conference, bringing 157 into view (Figure 1). Among G10 currencies, the Swiss franc, the yen, and the dollar strengthened ahead of the BOJ meeting this week. Markets appear to have trimmed risk exposure ahead of next week’s holiday period, with US equities undergoing a modest correction (Figure 2).
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