USD/JPY Makes Sharp U-Turn Following FOMC Minutes

This morning, the USD/JPY pair ended its week-long descent after bouncing off support near the 138.50 level. The pair has gained about 120 pips, wiping off the losses from yesterday. As markets processed the release of the bearishly skewed FOMC minutes, yesterday’s decline got tantalizingly close to its most recent low print around 137.60.

Tokyo’s overnight inflation figures exceeded expectations and hit a record last seen in 1982. The 3.6% increase in consumer prices suggests a faster rate nationally, and the Bank of Japan believes that inflation has not yet peaked. Gains in the cost of processed foods and a falling Japanese yen accelerated the pace of the increase.

The BoJ’s low-interest rate policy appears to be here to stay through the end of Governor Kuroda’s term in April, while inflation is predicted to decline starting in 2023 as soon as government subsidies for energy expenses take effect.

USD/JPY Aiming for 140 Psychological Mark

Following the selloff on Wednesday and Thursday, the US dollar index has found support, driving the USD/JPY back up toward the 140.00 psychological level. Following the release of the Fed minutes, markets began pricing in a 75% probability of a 50 bps rise for December, which caused the dollar to weaken.

Following the meeting, the Fed’s funds peak rate for May 2023 was revised downward because some policymakers expected rates to peak around 4.75% rather than the 5.25% suggested by recent Fed speakers.

Black Friday: USD/CAD on the Rise

In other news, as global bond yields rose again and investors watched Black Friday sales for hints on the state of the US economy, the Canadian dollar fell against the US dollar on Friday, giving up its gains from earlier in the week.

After fluctuating between 1.3318 and 1.3395, the loonie (USD/CAD) was trading 0.4% lower at 1.3390 to the dollar, or 74.68 US cents. It was expected to be essentially unchanged for the week.