USD/JPY Appreciates to New Highs Beyond 119.00 After Fed Rate Hike

• Dollar hits new 7-year highs beyond 119.00 after Fed hike.
• The Federal Reserve raises rates to 0.5% and points to six more hikes.
• USD/JPY seen rallying towards 122.90/123.00 – Credit Suisse.

The U.S. dollar has risen 0.5% against the Japanese yen to hit fresh long-term highs above 119.00 after the Federal Reserve announced its decision to raise interest rates.

Fed rate hike pushes US dollar higher
The dollar has extended its recent rally, pushing an already battered yen to hit a fresh seven-year low at 119.10.

The Federal Reserve has confirmed market expectations by raising the fed funds rate by 25 basis points to 0.50% for the first time since 2018.

Furthermore, the bank has hinted at seven rate hikes in 2022, which would mean one at each remaining monetary policy meeting.

The Monetary Policy Committee notes that supply difficulties and the fallout from the COVID-19 pandemic have pushed inflation to its highest levels in the last four decades and that the invasion of Ukraine is very likely to increase inflationary pressures and weigh on economic activity.

The rate hike has been approved by a vote of 8 to 1 with St. Louis Fed President James Bullard dissenting, who wanted a 50 basis point hike.

USD/JPY appreciates in the area of ​​122.90/123.00 – Credit Suisse

Taking a longer-term view, FX analysts at Credit Suisse see more room for USD appreciation: “We maintain our long-standing bullish view with resistance seen next at 2018 highs at 118.61/66 and at 122.90 /123.00 being our ultimate target (…) Support at 116.35/10 now ideally holds, although only a close below the 55-day moving average at 115.24 would warn of a ‘false’ break to the upside.”

Technical levels