USD/JPY Largest Single Day Rally In 14 Months!

Sell-off in yen leads to risk appetite returning, will the USDJPY 150 pips rally continue?

The dollar was one of the best performing currency yesterday as market’s confidence return as trade war tensions eased. Furthermore, North Korean leader Kim Jong Un met up with Chinese President Xi Jinping as rumored previously. Chinese state media reported Kim said he’s committed to denuclearization with conditions which eases one of last year’s greatest geopolitical risks.

There are a few reasons for the rally in USD/JPY:

US Q4 GDP is up 2.9% versus forecast of 2.7% by a stronger spending and smaller inventory. This could justify Fed’s aggressive interest rate hikes if needed which could allow Fed to adjust their projections on the outlook of the economy.

The surprise meet-up by North Korean leader and China’s president eliminated the risk of a potential US military action against North Korea attributed to North Korea’s nuclear programme.

The start of Japan’s new fiscal year caused a sell-off in yen as it appears that most of the repatriation has been completed. Japanese importers were even seen selling their domestic currency as reported by Bloomberg.

As the quarter draws to a closing, many investors can be seen profit-taking flows from USD/JPY shorts which contributed to the recovery in USD/JPY as well.

Moving forward, tomorrow is Easter Holiday. Besides Japan and China, all of the major markets will be closed on Friday. US and Canadian markets will be back online on Monday, but Europe, Australia, and New Zealand will remain closed until Tuesday.