USD/JPY keeps rising toward 110.00, ends week strongly higher

• US dollar rises across the board on Friday, extends weekly gains versus yen. 
• Higher US yields and a rally in Wall Street support the upside in USD/JPY. 

The USD/JPY rose on Friday for the fourth-day in-a-row, extending weekly gains to more than a hundred pips. During the American session peaked at 109.88, the highest level since December 31. It is about to end the week on a strong note, trading around 109.70/75, 125 pips above the level it had seven days ago. 

The greenback continued to be supported by an improvement in risk appetite and also by higher US yields. The 10-year climbed over the week from 2.69% to 2.78%, the highest in three weeks.  

Week ahead

A critical event in the US continues to be the federal government shutdown. Negotiations next week are likely to take place. The shutdown implicates that economic data from the Bureau of Economic Analysis and the Census Bureau will be postponed. Fears about the impact on the economy will continue to rise. Regarding data, the economic calendar includes the PMI. The Federal Reserve enters the blackout period toward the January 29/30 meeting. 

In Japan, the Bank of Japan will meet on Wednesday. “We expect the BoJ to keep its ‘QQE with yield curve control’ policy unchanged and we expect it to move steadily forward with the current policy for the near future. That said, the meeting has become more interesting following the recent weakening global market sentiment and lower oil prices”, wrote Danske Bank analysts.  They consider that the BoJ is likely to revise down its inflation forecast in the quarterly outlook report published along with the policy statement.

Levels to watch