The USD/JPY pair recovered all of its losses and is currently hovering around 149.00 in Tokyo. The US dollar index (DXY) reached 145.48 because of its volatility. The DXY moved between 111.46 and 112.26.

S&P500 futures went up after a good day on Friday. The rate on a 10-Year US Treasury is 4.21 per cent. Last week, the 10-year US Treasury yield hit a 14-year high of 4.34 per cent.

Reuters says the second USD/JPY knee-jerk reaction in a row is a sign that the BOJ may be getting involved in the FX market early.

Analysts at NAB in Sydney said, “It’s clear as day that the BOJ is meddling.”

Masato, Japan’s top currency diplomat, said that the government was ready to back the yen 24 hours a day, seven days a week, against speculative moves in the currency market that only went one way. Officials from Japan denied that they messed with the FX markets, but they said they would stop making moves that upset the markets.

The BOJ’s decision on interest rates on Wednesday will be critical going forward. The Bank of Japan will keep rates low because the economy is weak due to shocks to external demand. Last week, BOJ Governor Haruhiko Kuroda said that shocks to external demand could cause deflation in Japan’s economy. It shows that there is no way to tighten the policy.

Conclusion:

Those who trade the USD/JPY pair need to keep a close eye on how the BOJ and the Fed differ.