Prior to NFP, the USD/JPY is printing new cycle highs.
With the yen pressured by the dovish Bank of Japan, bulls eye a run into the 112 region.
USD/JPY is nearing the day’s highs of 111.64 at the time of writing, indicating a final push into the Nonfarm Payrolls report.
The US dollar has received yet another unexpected boost ahead of a report that is supposed to reveal whether the Federal Reserve will begin to remove its monetary stimulus sooner rather than later.
After posting its best monthly performance since November 2016, the US dollar index, which measures the greenback against six major equivalents, has now hit a three-month high of 92.587.
The reason was the Federal Open Market Committee’s (FOMC) surprising hawkish tilt at its most recent meeting, which forecasted two rate hikes by the end of 2023.
Meanwhile, the JPY has underperformed most currencies, pushed down by the Bank of Japan’s dovish stance.
“How the JPY performs against the USD in the coming weeks will be determined by how the Fed communicates its monetary policy,” Rabobank analysts argued.
“Although a few other factors are also likely to influence the currency pair, the broad expectation that the Bank of Japan will not tighten policy settings for some time means that domestic policies in Japan will provide minimal support for the JPY.”
Our projections have been pushed forward, and we now expect a move to 112 before the end of the year, according to the analysts./n
