Fed's Hawkish Hike Reasserts Dollar Yield Edge vs Yen
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The Fed's quarter-point hike, lifting the fed funds range to 3.75%-4.0%, has reinforced the yield advantage that continues to underpin dollar strength across G10 pairs, none more visibly than USD/JPY.
With US rates climbing and the BoJ still trailing well behind at a prospective 1.25% ceiling, the carry trade dynamic favors the greenback for now, pushing dollar-yen toward multi-month resistance near 156.13/50.
The setup leaves the pair highly sensitive to incoming data — any dovish tilt from the Fed or a surprise hawkish shift from Tokyo could quickly reprice the yield gap that's currently driving the trend.