USD/JPY finds support from carry trade, geopolitical risks, global inflation risk

<p>Analysts at MUFG have accepted that the the yen is not about to skyrocket higher just yet.</p><p>MUFG say USD/JPY will find support from "the return to carry". The carry trade has never really gone away. Yesterday yields on 2 year JGBs dipped back under zero %. Yep, carry is not dead yet. </p><ul><li><a href="https://www.forexlive.com/centralbank/japans-2-year-yield-has-dropped-back-under-zero-first-time-since-july-2023-20240115/" target="_blank" rel="follow" data-article-link="true">Japan's 2 year yield has dropped back under zero, first time since July 2023</a></li></ul><p>On the Bank of Japan, MUFG says the risk of tightening to being long USD/JPY "looks limited for now. "</p><p>More:</p><ul><li>The escalation of geopolitical risks could also help support USD/JPY.
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Higher crude oil prices are a Yen negative while increased global inflation risks may leave the Fed a little reluctant to push a dovish narrative, at least over the short-term as inflation risks could be seen to be rising.</li></ul><p>—</p><p>USD/JPY update: </p><p>—</p><p>Mitsubishi UFJ Financial Group is the world's second-largest bank holding company and second-largest public company in Japan.</p>

This article was written by Eamonn Sheridan at www.forexlive.com.