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  • USD/JPY extended its daily rally after FOMC Minutes on Wednesday.
  • US Dollar Index gained traction and rose above 93.00.
  • FOMC participants voiced concerns over yield caps’ impact on balance sheet.

The USD/JPY rose sharply in the last minutes and touched a fresh daily high of 106.00 as USD continued to gather strength against its rivals after the FOMC released the minutes of its July meeting. As of writing, the pair was up 0.5% on a daily basis at 105.95.

US T-bond yields turns north on FOMC Minutes

The FOMC’s statement showed that most policymakers judged yield caps and targets would provide only modest benefits, making it unlikely for the Fed to introduce yield curve control in September. Additionally, policymakers saw costs to yield caps and targets including a rapid expansion of the balance sheet.

This change of tone with respect to deficit seems to be providing a boost to the USD. As of writing, the US Dollar Index (DXY) was up 0.73% on the day at 93.01.

Moreover, the sharp upsurge witnessed in the US Treasury bond yields seems to be supporting the DXY’s rally. The 10-year US T-bond yield, which lost as much as 4% earlier in the day, was last up 2.45% on the day at 0.683%.

Technical levels to watch for