Rates Regime Reasserts Itself in Volatile USD/JPY

The relationship between interest rates and USD/JPY took an abrupt turn last week. The calendar turn marked the start of Japan's second fiscal year, but a strong rebound in US 2-year yields mirrored by a similar move in USD/JPY suggests that the disconnection may be temporary.

Fed speakers are expected to play a key role in reasserting the rates regime, particularly with Monday's ISM services PMI on the horizon. The dearth of top-tier US economic data has left room for volatility to arise from these catalysts.

BOJ Governor Kazuo Ueda is scheduled to speak on Tuesday, adding another layer of importance to the coming week's events. This speech may also contribute to increased volatility in USD/JPY.