USD/JPY registers a fresh six-year high at 122.43 as DXY strengthens and metal prices advance

• USD/JPY has climbed above 122.00 on rising metal prices.
• The DXY is approaching 99.00 amid rising odds of a 50 bps interest rate hike.
• Japan’s administration is likely to consider steps to cope with price hikes next week.

The USD/JPY pair has continued its five-day winning streak and seems stable above 122.00. The asset is witnessing a juggernaut rally and has registered a fresh six-year high at 122.43. The broader weakness in the Japanese yen is weighing pressure on the asset.

Rising metal prices in the global markets are hurting the Japanese economy to a major extent. Japan, being one of the major importers of oil and metals is facing some serious dents in its exchange flows. Every increasing cent in the prices of commodities is widening the fiscal deficit of Japan, which eventually is hurting Japanese economics.

The outperformance of the US dollar index (DXY) is also dragging the pair. The DXY is gradually moving higher as investors have started betting on a 50 basis point (bps) interest rate hike by the Federal Reserve (Fed). The inflation mess in the US is getting out of the grip and Fed policymakers are left with no other option than to elevate the interest rates swiftly. The 10-year US Treasury yields have advanced near 2.37% on the expectation of seven interest rate hikes by Fed Chair Jerome Powell by the end of 2022.

Meanwhile, Japanese Finance Minister Shunichi Suzuki has announced that the administration will consider steps to cope with price hikes after PM instruction expected next week. This may bring some stability to the Japanese yen.

Going forward, investors will focus on the US Pending Home Sales and Michigan Consumer Sentiment Index, which is due on Friday while the Statistics Bureau of Japan will report the Unemployment Rate next week.