USD/JPY Soars as Hawkish Fed Recalibration Trumps Japanese Intervention

The USD/JPY pair has been on an upward trend in recent days, reclaiming the 158 level after a significant collapse earlier this month.

This rebound is largely driven by the US side of the equation, with Treasury yields rising as markets price in additional rate hikes from the Federal Reserve by June next year.

The correlation between USD/JPY and front-end US yields remains historically elevated, with a +0.85 relationship with US two-year yields over the past week and +0.90 against US-Japan two-year yield spreads.

This suggests that traders should focus on shifts in the front of the US Treasury curve when analyzing USD/JPY movements.