USD/JPY Maintains High Standing Close to Its 20-Year High Point, Just Under the Mid-128.00 Levels

Bullish Run Extended Just a Bit

The pair of the US dollar and Japanese Yen continued to maintain its solid bidding tone all through the early part of the European session, and it was observed to be trading just some pips under the mid-128.00s, or the highest point was seen in almost twenty years.

USD/JPY price chart. Source TradingView

The combined forces of several factors helped the USD/JPY currency pair to extend its solid bullish run and gained a follow-up consolidation for about 13 days in a row on Tuesday. The widening difference between the monetary policies of the US Federal Reserve and the Bank of Japan was taken as a major factor supporting the latest surge seen since the start of this month.

The Bank of Japan has had several interventions to maintain the ten-year bond of the Japanese government under 0.25%, and it continued to maintain its stance on its loose monetary policy. On the other hand, all yields on the US government’s benchmark ten-year bond increased to the highest level it had seen since December 2018 in the midst of expectations that the Federal Reserve is set to implement a tighter monetary policy at a more rapid rate.

JPY Back as a Safe-Haven Asset

As things are, the market has fully priced in many 50 basis points in the interest rate increase from the US Federal Reserve as there are new concerns that the crisis situation in Ukraine has the potential of adding upward pressure to the high inflation on the ground already. This relation gave more impetus to the US dollar and, in turn, gave an additional push to the USD/JPY currency pair and continued to support the present positive movement.

The recent momentum might equally be ascribed to some experienced technical purchases after the sustained overnight movement over the 127.00 figure. The following strength took with it some trading stops of the short-term close to the 128.00 benchmarks. This gets the stage ready for more gains. However, some factors might be out to pull bulls back from staking new bets.

The possibility of an aggressive Federal Reserve policy to fight the higher-than-usual inflation as well as the ongoing war in Ukraine keeps adding more weight to the sentiment of investors. The evidence of this came from the easier tone that surrounded the stock markets, which seems to have been of benefit to the Japanese Yen as a safe-haven asset. It might later cap gains for the USD/JPY currency pair as there are conditions of overbuying.