[MARKET ANALYSIS] JPY continues to gain after daring commentary from US Treasury Sec. Bessent

G10s are mostly firmer against the USD. The JPY mildly outperforms vs peers, continuing to build on its recent strength. The Kiwi is the slight laggard this morning. Westpac remains short NZD/USD, targeting 0.5700 or lower vs a current price of 0.5846. DXY is incrementally lower this morning despite higher oil prices, and currently holding within a 98.61 to 98.82 range. Focus has been on geopolitical updates, after another bout of US-Iran fighting has led to a leg higher in energy prices, which in turn has lifted domestic yields. The US 2yr (4.4%) now holds near recent highs. Interestingly, the USD has not quite been able to benefit from the recent lift in yields; the strength in JPY remains the main reason why, but also as fiscal concerns grow, in relation to elevated borrowing costs. Perhaps some investors are considerate of the looming CPI report on Friday, which will likely be the deciding factor between whether the Fed holds or hikes this month. On the trade front, the Loonie is relatively unmoved to the US announcing an import ban on alcohol and other goods from Canada in response to the latter's tariff retaliation. The JPY modestly outperforms this morning, with USD/JPY holding within a 152.93 to 154.01 range. A continued bout of pressure will see the pair trade well within levels seen in mid-February, however, it will likely find some support at the 152.00 level, which was the low on 27 Jan 2026. A breach beyond that level would likely require a dovish US CPI report on Friday, a hold at the Fed next week and a hawkish BoJ policy announcement thereafter. The outperformance this morning can be attributed to daring commentary from US Treasury Sec Bessent. He stated that “I am the house now”, and has good insight into what Japanese policymakers and the BoJ will do. He provided a final warning that he has asymmetric information. The strong commentary from Bessent, along with hawkish BoJ speak over the past couple of weeks will keep JPY vigilantes on the sidelines, at least for now. However, once we get past the string of policy decisions next week – markets may begin to shift their attention back to energy dynamics, which JPY is particularly sensitive to.