USD/JPY spikes to 122.60 on firmer DXY and BOJ’s comments on rising commodity prices

• USD/JPY has attracted bids near 122.60 ahead of the US Nonfarm Payrolls.
• Rising odds of a 50 bps rate hike by the Fed are strengthening the DXY.
• BOJ’s officials are cautious over rising commodity prices.

The USD/JPY pair is scaling sharply higher after a correction near 121.30 as the Bank of Japan (BOJ) has shown fears over the rising commodity prices. The elevated prices of base metals, food items, and energy amid Russia’s invasion of Ukraine have made a devastating impact on the Japanese yen. Japan, being a major importer of commodities is facing a serious threat of a wider fiscal deficit.

The impact of rising commodity prices has been reflected on the yen in the past trading sessions. The asset has gained almost 8% in March. Mitsuhiro Furusawa, who was the head of currency intervention at Japan's Ministry of Finance, has shown worries over the vulnerable yen citing that it is not good for the yen to keep dropping as it reflects Japan's competitiveness.

Also, the bids on the yen have been faded after the wrap-up of the bond-buying program. The aggressive buying of Japanese Government Bonds (JGBs) to cap the yields at 25 basis points concluded on Thursday.

Meanwhile, the US dollar index (DXY) has climbed near 98.50 on rising odds of a 50 basis point (bps) interest rate hike by the Federal Reserve (Fed). CME Group's FedWatch tool is showing 71% odds of a half-point rate increase. Adding to that, uncertainty over the release of US Nonfarm Payrolls on Friday is improving the demand for the greenback.