USD/JPY reached its highest level in six years above 119.00 on Wednesday. In the view of economists at Westpac, the speed of the move through 117 is beginning to feel excessive, but it looks like the pair could extend all the way to 121 before any sign of pause.

USD/JPY remains the preferred way for the market to play long USD trades

“It’s pretty clear that USD/JPY remains the preferred way for the market to play long USD trades given the Fed has begun an aggressive tightening campaign and the BoJ appears to be pretty unfazed by the fact that the yen on a real effective basis is at lows back to 1971.”

“The speed with which we have broken above 117 does feel like we may start to see additional commentary from the MoF that they are ‘watching moves in the yen closely’ and that ‘stability in FX is important’ in the days ahead.” 

“Risks that the move extends towards 121 if, as we hope, we move to a formal ceasefire in Ukraine.”