Fed Hawkishness Pushes USD/JPY Higher Amid Broad Currency Strength

The US Dollar (USD) has extended its advance against the Japanese Yen (JPY) for the fifth consecutive day, driven by broad USD strength and persistent pressure on the JPY. At 158.80, the pair is trading near its current level after clawing back most of the decline from levels near 160 seen earlier this month.

The rebound comes as traders assess the monetary policy outlooks of the Federal Reserve (Fed) and the Bank of Japan (BoJ) following their September meetings. Markets see a growing chance that the Fed will raise borrowing costs again after delivering a 25-basis-point increase last week, which lifted the federal funds rate to 3.75%-4.00%.

The S&P Global Composite Purchasing Managers’ Index (PMI) climbed to a five-year high of 58.4 in September, while Initial Jobless Claims fell to 197K, below expectations of 201K. The previous claims figure was revised higher to 198K from 196K.

The US Dollar and Treasury yields are extending their advance in response, with the US benchmark 10-year yield trading around 5.16%, its highest level since 2007. However, bond sell-offs are not driven by monetary policy alone and are not limited to the United States.