Early Monday morning in Europe, USD/JPY hits 132.30. The Yen pair makes up for last week’s losses in terms of making easy money in the long run. The pair is likely to go up because of the demand for the US Dollar in a low-risk environment, the Fed’s tendency to be “hawkish,” and stable rates.

After Kazuo Ueda was named Governor of the Bank of Japan (BoJ), worries about an overly easy monetary policy helped the USD/JPY bulls.

But worries about the strange things flying over the US and China cause the USD/JPY exchange rate to go up. Nearly four unidentified objects were shot down by the US, and China is getting ready to target one of them. This has hurt market sentiment and helped the DXY. At press time, however, the DXY was up 0.20% near 103.80.

Through the strength of the US Dollar, the somewhat hawkish Fed talks and Friday’s high US Consumer Sentiment and inflation expectations raise USD/JPY prices. Over the weekend, Philadelphia Federal Reserve President Patrick Harker said that the Fed won’t cut rates in 2023. The Fed isn’t likely to cut rates this year, but they might be able to in 2024 if inflation starts to go down. His cautious optimism gave US Dollar buyers something to think about.

US stock futures lose their corrective bounce from the day before, and Treasury bond rates stay slow near Friday’s multi-day high. This helps the US Dollar Index (DXY) grind up after a two-week rise.

Conclusion

On Tuesday, preliminary readings of Japan’s GDP for the fourth quarter (Q4) will come out before the BoJ’s decision on how to control short-term USD/JPY swings. Next, the January US CPI will show where the Yen pair is going in the short term.