USD/JPY surges to 151.00 neighbourhood, fresh 32-year top amid rising US bond yields

• USD/JPY continues scaling higher on Friday and rallies to its highest level since August 1990.
• The Fed-BoJ policy divergence continues to weigh on the JPY and offers support to the pair.
• The continuous rise in the US bond yields underpins the USD and provides an additional lift.

The USD/JPY pair is prolonging its well-established bullish trend and gaining strong follow-through traction on the last day of the week. The buying interest picks up pace during the mid-European session and lifts spot prices to the 151.00 neighbourhood, or a new 32-year peak.

The selling bias around the Japanese yen remains unabated amid a big divergence in the monetary policy stance adopted by the Bank of Japan and other major central banks. This helps offset threats of an intervention by the Japanese government and continues to push the USD/JPY pair higher.

The US dollar, on the other hand, climbs to a fresh weekly high and remains well supported by hawkish Fed expectations. In fact, Philadelphia Fed President Patrick Harker warned on Thursday that the US central bank is actively trying to slow the economy to combat stubbornly high inflation.

Meanwhile, firming expectations for a more aggressive policy tightening by the Fed pushes the yield on the benchmark 10-year US government bond to its highest levels since the 2008 financial crisis. This results in a further widening of the US-Japan rate differential and weighs on the JPY.

Apart from this, the latest leg of a sharp move-up witnessed over the past hour or so could further be attributed to some technical buying above the 150.50 area. It will now be interesting to see if the momentum marks a fresh breakout or turns out to be a stop-run amid extremely overbought conditions.

There isn't any major market-moving economic data due for release from the US on Friday. Hence, the US bond yields will continue to influence the USD price dynamics and provide some impetus to the USD/JPY pair. Nevertheless, spot prices remain on track to register gains for the tenth straight week.

Technical levels to watch