During the week from 7 to 11 September, the unwinding of yen carry trades, higher crude oil prices and rising US interest rates produced mixed moves, with USD/JPY swinging sharply from the 156 level to the 152 level and repeatedly moving between the 154 level and sharp declines and rebounds throughout the week.
At the start of the week, yen buying led in the Tokyo market, pushing USD/JPY back down from around 156 toward its recent lows. In the London market, thin liquidity triggered stop-loss orders, with USD/JPY frequently falling below 156 and the 154 level coming into focus. Yen strength continued the following day, with USD/JPY at one point falling to 152.89 during Tokyo trading, but a correction of the overheated move in London lifted it back to the low 154s.
On the 9th, yen selling and buying again alternated in the Tokyo market, sending USD/JPY back down to the upper 152s. In the London market, higher crude oil prices and a rise in the 10-year US Treasury yield at times encouraged dollar buying and yen selling, while yen buying strengthened again during New York trading after cautionary comments from the US Treasury Secretary.
On the 10th, USD/JPY continued to trade mainly in the 153s in Tokyo. Hawkish comments from a Bank of Japan official temporarily pushed the dollar higher, but it was again forced back down to the low 153s. In the London and New York markets, dollar buying prevailed amid movements in crude oil prices and long-term interest rates, lifting USD/JPY to around 154 before selling into the rally emerged.
On the 11th, USD/JPY weakened below 154 to 153.96 in Tokyo. Dollar strength and yen strength continued in the London market, while cautious trading spread ahead of the US CPI release. In New York, expectations grew that next week's FOMC outlook could shift depending on the CPI result, and the dollar temporarily rebounded to the upper 153s, but ultimately remained just below 153.50.