USD/JPY surged to its highest level in two months above 136.00 on Friday. There is scope for further upside in the near-term, economists at MUFG Bank report.

Upside risks for USD/JPY

“The recent move higher in US rates has helped to lift USD/JPY back above the 135.00 level and it has continued to move closer to its’ 200-Day Moving Average that comes in at around 137.10.”

“We still expect the BoJ to abandon Yield Curve Control in Q2 while maintaining negative rates this year, although there is a higher risk it could take longer to make further adjustments to YCC. It leaves the Yen vulnerable to weakness in the near-term while yields outside of Japan are rising again.”