USD/JPY bulls step it up a notch aheda of NFP

At the time of writing, USD/JPY is near the highs of the day at 111.64 in what appears to be a final push into the Nonfarm Payrolls data.

The US dollar has picked up yet another unexpected bid ahead of a report that is likely to give some clues on whether the Federal Reserve will start to reduce monetary stimulus sooner rather than later.

The US dollar index, which measures the greenback against six major counterparts, has just made a three-month high of 92.587 after it posted its best monthly performance since November 2016.

The catalyst has been in the Federal Open Market Committee's (FOMC) unexpected hawkish shift at its lats meeting, forecasting prospects of two interest rate hikes by the end of 2023.

Meanwhile, the JPY has underperformed most currencies, weighed by a dovish position of the Bank of Japan.

''How, the JPY performs in the coming weeks vs the USD will depend on how the Fed communicates its monetary policy.,'' analysts at Rabobank argued.

''Although a couple of other factors are also likely to influence the currency pair, the widespread assumption that there will be no tightening in BoJ policy settings for some time suggests little support for the JPY from domestic policies in Japan.''

The analysts said that they have brought forward our forecasts and now see a move to 112 by the end of the year.