New Highs as Bullish Momentum Grows

The USD/JPY currency pair has gone up again on the day by about some 0.3% at around the 121.07 zones and it has traveled smoothly and glided between the low points of 120.75 and up to 121.41 zones thus far in the Asian market. The currency pair has succeeded in making a new high point for the first time since January 2016 on continuously increasing expectations that the United States Federal Reserve was going to deliver a highly swift response with regards to the skyrocketing inflation problems.

USD/JPY price chart. Source TradingView

Financial analysts with ANZ Bank mentioned in a note to clients that the current times are challenging for most fixed income markets with the combined forces of hawkish policies from various central banks, escalating prices of commodities, ongoing problems in the supply chain sector, as well as increasing pressures on various currencies from inflation, are factors exerting very strong pressure on different bond yields. They added that lifting bond yields has been effective in tightening monetary policy conditions.

Meanwhile, more sets of expected hawkish Federal Reserve comments have maintained global bond yields on the upward trajectory. Nevertheless, the rally in Asia extended to the United States and Europe.

Coming Speeches from the Federal Reserve

The markets are expecting statements from the Federal Reserve Chair, Jerome Powell, and other reserve policymakers to give more directions on policy movements as there are indications that the Federal Reserve will increase interest rates at all its remaining six monetary policy meetings for the rest of the year. The money markets are already pricing in as high as 50 basis points of an interest rate hike in the May meeting of the Federal Reserve. There are speculations that by the time the year runs out, the Federal Reserve would have increased interest rates as high as 190 basis points cumulatively.

Some risk-sensitive currencies have performed beyond their expected capacities and that has been weighing on the Japanese yen. The hawkish Federal Open Market Committee member, James Bullard, stated that the Federal Reserve needs to adopt a more aggressive policy disposition so it could effectively tame inflationary risks. He advised that the Federal Reserve should not wait for political tensions to ease before taking stronger measures.

When financial analysts with Westpac explicated Bullard’s position, they simply said that he expects to see a swift reduction of the balance sheets and a fast move that can restrict policy levels slightly.