The Japanese yen returned to its normal level this year after the Bank of Japan stepped in to defend its implicit yield cap on Monday, as BOJ steps in, it's likely that it's going to take a leap.
The yen fell to as low as 122.78 per dollar, its lowest since December 2015, giving it a mini recovery from Friday when the Bank of Japan did not step in to defend its target.
On Monday morning, the BOJ offered to buy unlimited 10 year Japanese government bonds JGBs at 0.25%, after the 10 year JGB yield went up to a six-year high of 0.245%.
Since the rapidity of its ascent, analysts at Barclays believe that the dollar-yen will remain well-supported at high levels, citing the negative impact of higher commodity prices on Japan's terms-of-trade.
The Bank of Japan is dovish, given policy indicators' fears that higher prices due to rising energy costs could hurt the world's third-largest economy, and the U.S. Federal Reserve firmly hawks rate hikes this year.
A senior Japanese government official said on Sunday that monetary policy must remain loose.
Commodity prices have provided a strong impetus for commodity currencies, as they have pummelled the yen in recent weeks.
The Aussie dollar was close to its four month high last week, while the Canadian dollar was at 1.2496 per dollar, just off Friday's two month peak.
Aussie currency watchers are looking out for Australia's budget on Tuesday. Australia's Treasurer said on Sunday that the budget would be a very significant improvement to the government's bottom line.
One possible headwind for the Aussie is the COVID 19 situation in China, after Shagnhai said on Sunday it would lcockdown the city to carry out COVID 19 testing.
The dollar climbed to 6.394 on Monday morning, up 0.17%, on the offshore currency.
Major eurozone economies are due to report inflation figures from Wednesday, and a stronger than expected Eurozone CPI will add to rates market pricing for ECB tightening, underpinning the euro, according to Barclays analysts.
The single currency was at $1.0973 last week, having edged slightly lower in recent days, but is still under pressure because of the economic impact of the war in Ukraine.
The pound was a 0.1% softer at $1.3168 and the dollar index was steady at 98.909.
The market is already positioned for several rate hikes this year and analysts are not expecting this to have a major effect on U.S. interest rate expectations and the dollar on Friday, as well as U.S. non- farm payrolls data.
In early trading, it was close to $46,800, after jumping to as high as $47,766, its highest level since January. The world's second largest criptocurrency was $3,289.