Yen Weakens Further, USD/JPY Breaks ¥121

Risk sentiment continues to recover globally, and the Japanese Yen continues to weaken on the BoJ’s standout dovish policies.

• The Forex market is dominated by a weak Japanese Yen (influenced by the Bank of Japan’s pledge to continue monetary easing until its inflation target of 2% is reached) and a strong British Pound. The USD/JPY currency pair continued to rise over the past day to trade at a new 6-year high above ¥121, a key psychological level. It looks likely to advance higher still over the coming days. Other Yen crosses, notably the GBP/JPY, are advancing even more strongly.

• Markets have seen a recovery in risk sentiment over recent days, following the Fed’s 0.25% rate hike and measured but tough language last week, and Russia seemingly being fought to a near-standstill in Ukraine without any major escalation. This has boosted the price of stock markets and several agricultural and energy commodities, with crude oil rising (despite the Saudi Aramco pledging to double production) and cotton trading at a multi-year high.
• The Russian invasion of Ukraine is well into its fourth week, with the Russian advance clearly stalled by Ukrainian military force and logistical problems. Russian sources seem to have admitted its death toll is close to 10,000 soldiers killed. The US is warning of the possibility of Russian cyberattacks and a potential staging of a chemical incident in Ukraine. Russia yesterday refused to rule out the use of nuclear weapons “if Russia’s existence is threatened”.
• There will be a release of British CPI (inflation) data today and the government’s annual budget release. This may cause volatility in the British Pound, which is already the strongest currency in the Forex market today.
• Daily new coronavirus cases globally rose last week for the second consecutive week for the first time since January, suggesting that the omicron variant is not going to disappear despite the recent huge wave of infection. It is estimated by the CDC that roughly one third of new cases are caused by the BA2 omicron sub-variant, which appears to be approximately 30% more infectious than the original omicron variant.
• It is estimated that 64% of the world’s population has received at least one dose of a coronavirus vaccination, while approximately 6% of the global population is known to have contracted the virus at some stage.
• Total confirmed new coronavirus cases worldwide stand at over 474.7 million with an average case fatality rate of 1.29%.
• The rate of new coronavirus infections appears to now be increasing only in Australia, Austria, Cyprus, China, Greece, Italy, South Korea, Laos, Luxembourg, Malta, Monaco, Samoa, Switzerland, Thailand, Tonga, the UK, and Vanuatu.