The U.S. dollar strengthened in five consecutive trading sessions against the Japanese Yen and continued through Wednesday morning. USD/JPY is currently at 116.16.

That was topping its highest level since March 2017. The sharp strengthening of the US Dollar against the Yen is actually inseparable from the recovery of risk-on sentiment. 

The Market participants see the Omicron variant as not potentially threatening the global economy even though the spread is relatively fast in recent times in so many countries. 

This optimism is based on a recent research which reveals that the Omicron variant only attacks the bronchi. It is a good sign for the market for sure. 

Omicron Brings the Positive News Due to It’s Effectiveness 

The effectiveness of the Omicron variant is said to decrease drastically when it reaches the lungs. it can be concluded that the COVID-19 variant from South Africa will not take many fatalities. 

This is the positive news for market participants who had previously worried about Omicron's impact on the economy and the prospect of a Fed Rate Hike as well in the future. 

Of course the USD/JPY broke a key resistance and hit a 5-year high. All due to being driven by U.S. bond yields. People have entered 2022 and markets are preparing to see higher Fed interest rates.

Those are the main catalysts which driving the dollar against the Yen. Meanwhile, the yield on 5-year United States bond recently hit its highest level since February 2020. 

The Rising U.S. bond yields reflect that the market participants increasing their bets on the prospect of a Fed rate hike. It seems that most of the people are having the same prediction. 

US Central Bank Needs to Increase the Rate

The CME FedWatch data last night showed a Rate Hike projection of 25 basis points in March with a probability of reaching 60 percent. Meanwhile, Neel Kashkari also gave his opinion. 

He argued that the America's central bank needs to raise their interest rates twice by 2022. In fact, the figure of the President of the Minneapolis Fed has been known as one of the Fed's top brass who is dovish.

Elsewhere, The Institute for Supply Management (ISM) which publishes the United States Manufacturing PMI data reported a drop in the index to 58.7 in December. 

That level was down from the previous period and failed to meet the expectations of achievement at 60.0. Historically, this figure is also the lowest one since January 2021.

The Lack of Raw Material and It’s Impact 

The Institute for Supply Management (ISM) which publishes the United States Manufacturing PMI data reported a drop in the index to 58.7 in December. The level was down from the previous period.

Furthermore, it was also failed to meet the expectations of achievement at 60.0. Historically, this figure is also the lowest position since January 2021.

The problem of the raw material lack supply is the main cause. In the midst of the economic recovery from the crisis due to COVID-19, the surge in demand is not balanced with the availability of goods. 

A Concern about Pandemic Is Still There

This condition is also triggering the current increase in U.S. inflation. Meanwhile, JOLTs Job Openings fell from 11.09 million to 10.562 million in November. 

In fact, analysts estimate the acquisition of 11 million. The massive resignations have shown no signs of abating, and instead set a new record. The question is why, and the answers are at odds. It was said by Robert Frick as an economist at Navy Federal Credit Union.

On the one hand, fatigue and fear of COVID continues to occur, but Americans are still convinced to look for jobs that offer the higher salaries along with the many job openings today.