USD/JPY pushes to new multi-year highs above 121.00, supported by stream of hawkish Fed speak By Frank_Macro USDJPY Fed Bonds
ins support above 121 and trading with on-the-day gains of about 0.25%. Though subdued price action in US bond market removes one major tailwind for the pair, higherwith US President Joe Biden due to arrive in Europe on Wednesday and Western nations subsequently expected to announce new sanctions against Russia is undermining the yen. The US is net crude oil exporter, shielding the buck from the negative impact oil price upside, whereas Japan is a big net energy importer.
Wednesday’s upside may also be a reflection of a continued and steady stream of Fed speak, with policymakers indicating their desire to support/openness towards larger 50bps rate hikes at upcoming meetings. This is reinforcing the hawkish message conveyed by Fed Chairon Monday and is underpinning the US dollar even if the move higher in US yields has run out of steam. Either way, USD/JPY’s rally abve 121.00 on Wednesday takes its on-the-month gains to now roughly 5.3%.
The hawkish shift from the Fed serving to ensure that US bonds cannot be used as a safe haven amid the ongoing Russo-Ukraine conflict, making a significant reversal lower in yields unlikely. Higher yields mean the US dollar is the haven of choice to hedge geopolitical risk, as opposed to the yen.
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