New York Fed President John Williams Signals Rate Hold as Economy Seen Strong in 2026 
Markets React as Tensions Rise Between White House and Federal Reserve Over Interest Rate Pressure 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 
Fed Confirms Rate Meeting Schedule Despite Severe Winter Storm in Washington D.C. 
2025 Market Outlook: Key January Events to Watch 
Global Markets React to Strong U.S. Jobs Data and Rising Yields 
Bank of England Expected to Hold Interest Rates at 3.75% as Inflation Remains Elevated 
BOJ Holds Interest Rates Steady, Upgrades Growth and Inflation Outlook for Japan 
Bank of Korea Expected to Hold Interest Rates as Weak Won Limits Policy Easing 
The Japanese central bank (BoJ) left its expansionary monetary policy unchanged in its statement. What matters more is the message that BoJ Governor Haruhiko Kuroda delivered at the press conference. Many observers had expected first hints that the ultra-expansionary monetary policy might come to an end, e.g. that the yield target for JBGs may be raised. This speculation was caused by a speech of Kuroda, in which he also referred to the negative effects of ultra-expansionary monetary policy and in which the top Japanese central banker designs a scenario in which low-interest rates can be counterproductive for the inflation target.
Since the BoJ succeeded in killing yen volatility, USDJPY has been a proxy of dollar rates. Japanese long-term rates are following US rates, but have shown almost zero volatility for a year now (refer above graph).
USDJPY is thus coincidentally positively correlated with JPY rates. This positive relationship actually started in 2015, when the market began to challenge BoJ monetary policy more seriously (refer above graph).
But this has not always been the case, and prior to that, USDJPY tended to come under pressure when JPY rates moved up.
As long as the Japanese rates market is dormant due to the BoJ commitment to monetary easing, the currency will likely stay driven by the dollar leg. But we think that won’t be the case forever: at some point, the yen leg will come out of hibernation.
Buy USDJPY 1y put spread strikes 106/103, global knock-in 116 Indicative offer: 0.33% (vanilla: 0.75%, spot ref: 113.502)
Trade risks: no activation. Investors trading a put spread with a global knock-in cannot lose more than the premium initially paid. However, the structure will be activated only if USDJPY hits the 116 knock-in. Otherwise, it will expire worthless even if USDJPY trades below 106 one year ahead.
Currency Strength Index: FxWirePro's hourly USD spot index is flashing 56 (which is bullish), while hourly JPY spot index was at -164 (which is bearish) while articulating (at 08:52 GMT). For more details on the index, please refer below weblink:
http://www.fxwirepro.com/currencyindex.
FxWirePro launches Absolute Return Managed Program. For more details, visit:
