USD/JPY Trapped in Tight Range, Fed and BoJ on Collision Course
The USD/JPY currency pair has been trading in a narrow range between 155.28 and 160 for four weeks, with every move towards the top being met by official statements and every move towards the bottom being met by the U.S. bond market.
The Federal Reserve is currently at a rate of 3.75% to 4.00%, with a 70% probability of another hike on October 28, while the Bank of Japan has raised its policy rate to 1.25% after a September 18 hike.
The 10-year Treasury yield is near the highest since 2007 at 5.26%, and the policy spread between the U.S. and Japan is wide enough that it carries itself at 157.
Japan spent a record ¥15.4 trillion defending the yen this summer, and the U.S. President's comment to Japan's Prime Minister has been seen as a warning about further yen weakness.