USD/JPY broke above 120 for the first time since 2016 in early Tuesday trading. This latest leg higher comes as the US Federal Reserve doubles down on its commitment to do whatever it takes to combat inflation. Meanwhile, the Bank of Japan remains the most steadfast in its commitment to keep interest rates low as its peers contemplate tightening policy.
In truth, this divergence between the two central banks has been playing out for some time. USD/JPY has risen by c. 4.71% against the US dollar year to date, making the Japanese yen the worst performing major currency. Even the war-torn EUR/USD, down by 3.2% since the start of last year, has fared better than the Japanese yen versus the US dollar.
