Title: USD/JPY marches towards 139.00 as Fed vs. BOJ divergence propel yields, US NFP eyed

August 29, 2022 12:28 AM ET

By: AnalysisWatch

During the Asian session on Monday, the USD/JPY pair took bids to renew the one-month high at around 138.60. In doing so, the yen pair is taking advantage of firmer Treasury yields and monetary policy divergence between the U.S. Federal Reserve (Fed) and the Bank of Japan (BOJ) to focus buyers on the one-year high reached in July.

After Fed Chairman Jerome Powell said in his much-anticipated speech at Jackson Hole, "Restoring price stability will take time and will require "vigorous" use of the central bank's tools," the policymaker also stated that restoring price stability will likely require maintaining a tight monetary policy stance for "some time." On the other hand, BOJ Governor Haruhiko Kuroda mentioned that the central bank is likely to continue its accommodative policy in Japan, according to Reuters.

Against this backdrop, Reuters reported that the dollar index hit a fresh two-decade high of 109.4 points in early Asian trading, with the greenback's strength pushing other major currencies to new lows and pressuring emerging market counterparts.

It should be noted that the Bank of Japan offered to buy Japanese government bonds (JGBs) with a remaining maturity of more than 5 years and up to 10 years at a fixed rate from August 30, Reuters reported.

Aside from the central bankers' actions, fears related to U.S.-China tensions and talk that interest rate hikes are not enough to avoid a recession are also driving USD/JPY rates lately.

Ahead of the release of the U.S. August jobs report on Friday, Fed speakers and U.S. PMIs could entertain USD/JPY watchers. If initial jobless claims come in higher than expected, the dollar index could continue its recent rally towards a multi-year high.