November 08,2022 12:46 AM ET
By:AnalysisWatch
USD/JPY has jumped upwards from the sideways profile in the Tokyo session. Earlier, the asset rebounded from 146.40 in the early Tokyo session.
The risk profile is souring as investors are cautiously awaiting the outcome of the US mid-term elections.
The powerful US dollar index (DXY) has refreshed its high of the day at 110.40 as the risk aversion theme is gaining traction. Slight gains posted in S&P 500 futures have eased as risk appetite is waning. U.S. 10-year Treasury yields have reached 4.23% following hawkish guidance from Richmond Federal Reserve (Fed) President Thomas Barkin.
Fed policymakers have contrary views to the talk of a slowdown in the pace of rate hikes. Current interest rates are close to the proposed 4.80%, and smaller rate hikes will be seen in the future. Fed President Barkin believes that the current pace of rate hikes will continue as inflationary pressures have not yet shown signs of running out of steam.
The outcome of the US mid-term elections seems to favor the Republicans. A note from ANZ Bank states that "we consider a Republican-controlled Congress to be the most likely scenario (55%)." "Not far behind, at 41%, is a divided Congress, with a Republican-led House of Representatives and a Democratic Senate." A similar development could bring political instability to the economy.
On the Japanese yen front, the Tokyo bulls face pressure because Japanese Prime Minister Fumio Kishida is set to approve $198 billion in additional budget for the economic stimulus plan, Bloomberg reports. The government also "may choose to raise taxes on ultra-wealthy individuals with annual incomes of more than 1 billion yen ($6.8 million)."