The US jobs report released last Friday was a more closely watched event than usual.

This was because there were signs of softening in the economic indicators, and it was thought that if the JOLTS showed that job growth was coming to a halt, the market would be inclined to cut rates early in one fell swoop. However, the good figures actually turned the market’s bearish tilt upside down and led to a major rebound in the dollar over the weekend.

To begin with, the Mexican peso was sold off after Ms Sheinbaum won the Mexican presidential election, a risk-off that indicated the international community’s scrutiny of anomalies such as the death of one election candidate after another, and the prospect of a crushing victory in the Indian general elections. When Prime Minister Modi lifted the lid, it was reported that he struggled, and the Indian stock market, taken by surprise, suffered a sharp fall of over 8%.

These factors led to profit-taking selling in many yen crosses, with the dollar falling 1.8 yen from its high of around 154.70 yen, the euro falling 2.6 yen from its high of around 168.10 yen, and the Australian dollar falling 2 yen from its high of around 102.62 yen, which spilled over to the fall of straight dollar currencies. The dollar was also affected by the Indian election result, which was seen as a sign of the Indian election.

However, the relationship between the Indian election result and the yen is as far as it goes. It was merely bought back in a game of association. Therefore, at some point, the forces of reversion will kick in and the market, having cooled down, will resume selling the yen, taking the USD/JPY pair back to the 156 level.

This week, the BoJ may tighten policy at its policy meeting. However, Governor Ueda told the House of Councillors’ Finance and Monetary Affairs Committee that “the actual inflation forecast is some distance away from reaching 2%”, while Nakamura, a well-known doves, said that “based on the current data, it is appropriate to maintain the current policy for the time being”, dampening expectations of a change in policy at the BoJ’s policy meeting. The Bank of Japan’s 10-year interest rate is split at 1 per cent. Japan’s 10-year interest rate fell below 1% to around 0.96%, and the yen strengthened against the dollar to around ¥155.35 in the morning before buying back to ¥156.38 at the European market entrance.

In other words, the battle between credit expansion and credit contraction was won by risk-on, as credit was stretched in many parts of the world. Japan’s Ministry of Finance has been forced into a situation where it must continue to intervene in order to maintain the exchange rate level, and there will be policy pressure from the Government Prime Minister’s Office on the BoJ in the form of reports and meetings.