USD/JPY bears move in at resistance 137.80

USD/JPY is under pressure in Asia, attempting to correct the US Dollar's rally from the prior day. At the time of writing, USD/JPY is down by some 0.28%, falling from a high of 137.80 to a low of 137.35 so far. 

The US Dollar soared on Thursday, led by strong gains against the yen as investors worry about the risk of recession with the Federal Reserve likely to raise interest rates well into next year. The Federal Reserve chair Jerome Powell said more increases would come next year and the benchmark overnight interest rate would rise above 5% in 2023. Money market participants expect at least two 25 bps rate hikes next year and borrowing costs to peak at about 4.9% by midyear, before falling to around 4.4% by the end of 2023. 

This has fuelled a risk-off tone in markets in the country down to the holidays next week. The US stock indexes closed sharply lower on Thursday. The drop in the benchmarks marked the biggest one-day percentage drop for the S&P and Nasdaq since November 2, and the largest for the Dow since September 13. Each closed at its lowest level since November 9.

JPY remains the worst performing G10-FX YTD

Meanwhile, analysts at Rabobank noted that the ''JPY remains the worst performing G10 currency in the year to date, with losses vs. the USD that currently stand at 14.9%.  However, when USD/JPY hit a recent high at around 151.95, the JPY’s year-to-date drop stood at over 22%.''