'Understandable' that the yen moved back to 153 against the dollar, strategist says

The number that we have seen from 1:55 to 160 was really just driven by momentum trading because as far as fundamentals go, which is actually the US Treasury yield versus the Japanese government bonds. It’s actually understandable that the yen has actually gone back to 153 because our short term fair model suggests that it is around that level. So anything in excess of 153 is really just trader excitement over the lack of intervention. It was as if the market was prompting the MOF to intervene, otherwise they will just run with the story. So in our view 153 is actually fair value but. Any decline to that will have to be driven by a continued decline in the US yields. And that’s going to be perhaps the most interesting to watch as well, because as you say, policy divergent could become a bigger driver for FX moving forward. Unpack for me where you see USD moving from here. the Fed says hikes are not being considered at this point. But at the same time, it is getting harder for the Fed to also justify rate cuts. If we look at the NFP in isolation, OK, perhaps a little weaker than expected, but the data trend has been suggesting that the Fed may need to have rates higher for longer in the United States. What does that mean for markets and the USD? Well, now that the Fed has basically taken out the possibility of further hikes, now the question is no longer can they be hawkish because they’re saying they’re going there as hawkish as can be. The next question then turns into whether other central banks can become hawkish. And at this point in time, very few of them can remain hawkish. So the next question will be who’s going to be the most dovish? And in our view, the ECB is really coming out quite dovish and that would mean a weaker euro at the end of the day. That’s really just extending the window of strength of the dollar.