USD/JPY drops below 128.00 for the first time since May 2022
13.01.2023, 15:08

USD/JPY drops below 128.00 for the first time since May 2022

  • Japanese yen extends gains across the board on Friday.
  • US Dollar up for the day, sharply lower for the week.
  • USD/JPY drops for the second day in a row.

The USD/JPY is falling sharply for the second day in a row and it is trading under 128.00 at the lowest level since late May of last year. The decline takes place even amid a modest recovery of the US Dollar following Thursday’s slide after US CPI data.

After a short-lived recovery, USD/JPY resumed the downside, breaking below 128.00. As of writing, it is trading at fresh lows at 127.70/75, as the recovery of the greenback losses momentum and Wall Street moves off lows.

Japanese Yen among the top performers

The divergence between the Federal Reserve and the Bank of Japan that has been boosting the USD/JPY pair for months has now partially reversed, not because of clear action but on the back of a change in expectations. The Fed is seen near the end of its rate hike cycle while there are growing speculations about a shift at the Bank of Japan. Some reports indicate the BoJ could review the side effects of its ultra-accommodative policy as soon as next week.

Japanese bond yields soared also helping the JPY. The 10-year yield rose to the highest since 2015. On the contrary, the decline in US yields weighed on USD/JPY. The US 10-year yield stands at 3.46% compared to 3.70% from a week ago.

On Friday, the deterioration in risk sentiment contributed to the strength of the Japanese currency. The Dow Jones is falling by 0.15% while the Nasdaq declines by 0.35%.

The latest economic report of the week showed the US Michigan Consumer Sentiment Index rose in January to 64.6 surpassing expectations of 60.5.

Technical levels

 

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