MUFG: The JPY

The USD/JPY opened the week at 157.79. The pair edged steadily higher from the start of the week as crude oil prices and US rates rose amid escalating tensions in the Middle East, reaching a high of 158.68 on 20 October. However, the USD/JPY struggled to extend its gains as political instability in France and declines in Al- related stocks added to risk-off sentiment across financial markets. Yen buying prevailed from Tokyo trading on 22 October, pushing the pair lower. The USD/JPY broke below 157, which had also marked this month’s low, and extended its decline to below 156.50 early on 23 October. The pair subsequently rebounded, with markets also taking note of comments from Minister of State for Economic and Fiscal Policy Minoru Kiuchi that were seen as signaling caution on monetary policy. As of writing, the USD/JPY was trading around 157 (Figure 1). Among G10 currencies this week, the euro weakened broadly as political concerns in France spread to other countries in the region (Figure 2).