Japan Earthquake Shakes the Yen, USD/JPY

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The USD/JPY pair experienced a recent surge, surpassing the 145.00 level, primarily driven by contrasting policies between the Bank of Japan (BoJ) and the Federal Reserve (Fed). Notably, the yen weakened following BoJ Governor comments hinting at a prolonged delay in rate hikes, linked to uncertainties after the recent earthquake in Japan. This delay suggests that rate increases might be postponed until at least March or April, leading to increased selling pressure on the yen.
The week was heavy weighting on the Yen and it was the worst-performing G10 currency for the past trading week.

Meanwhile, outside Japan, bond yields, particularly the 10-year US Treasury yield, have seen a modest rebound from the lows seen at the end of the previous year. Expectations for significant rate cuts by major central banks in 2024 have been tempered, with market participants adjusting these projections based on recent economic data, which raised doubts about immediate rate cuts in Q1.

The latest release of the US employment data, including the NFP report, showed stronger-than-expected numbers. The NFP report indicated a rise in non-farm payrolls to 216K, surpassing the consensus forecast of 170K, while the unemployment rate also decreased. This robust employment data suggests a healthier labor market, potentially altering the Federal Reserve's perception of labor demand and may influence their decisions regarding rate adjustments.
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