Ella 
USD/JPY hit a fresh yearly high of 146.55 amid concerns about Japanese policymakers intervening in the market to defend the yen, but lacked follow-through. However, widespread risk aversion and hawkish concerns about the Federal Reserve supported the pair’s gains early on Thursday.
Sentiment soured as traders worried about a hawkish Fed amid global economic woes. Geopolitical and economic concerns from China and recent mixed U.S. data also challenged sentiment.
The minutes of the latest Fed meeting highlighted policymakers’ discussion of inflationary pressures despite disagreement over the decision to raise interest rates. Still, the minutes conveyed that most policymakers were inclined to support the fight against “sticky” inflation. U.S. industrial production also followed upbeat retail sales data, helping markets to justify the Fed’s hawkish leanings.
Also fueling fears of another bond market crisis in Longguo, Chinese home prices fell in June for the first time this year as Country Garden, the largest private property developer, struggled to make bond payments.
As a result, S&P 500 futures fell to their lowest level in five weeks and are now hovering around a multi-day bottom of 4,415-20. U.S. stock futures followed Wall Street’s benchmark indexes lower.
It is worth pointing out that the U.S. 10-year Treasury yield rose to its highest level since October 2022 and is currently around 4.298%. It should be noted that high bond prices fueling fears of an economic slowdown and dragging down risk asset prices are also supporting the dollar through the end of 2022.
On the other hand, generally stronger US data and mixed Japanese data also tested USD/JPY. Earlier today, Japan’s machinery trade balance in July was mixed, while machinery orders in June were upbeat, defending Bank of Japan officials’ support for ultra-loose monetary policy.
Risk catalysts will determine USD/JPY’s short-term direction, while data elsewhere is light.
