USD/JPY: Confident Fed to firm up the pair – ING
|A expected hawkish Federal Reserve is set to underpin the US dollar and send USD/JPY higher as the pair has not been affected by a drop in US yields, economists at ING inform.
USD/JPY is at the forefront of the dollar rally
“USD/JPY has held up pretty well in the face of the drop in US 10-year yields under 1.20%. We feel that thin summer conditions and heavy Fed buying are behind the drop in US yields – such that the move will be reversed in September. That could keep USD/JPY supported even though speculators are reasonably short JPY already.”
“Probably the biggest risk to USD/JPY now is that the Delta variant shuts down Asia and especially China more broadly – prompting a re-assessment of global growth and equity valuations. But that seems a risk case at present. Instead, a Fed sounding quietly confident can see US money market rates and USD/JPY firm up.”
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