USD/JPY drops below 118.00 on China-US drone incident

The yen rose across the board after a report mentioned that the Chinese Navy seized an American underwater drone in the South China Sea. The US later, demanded the return of the vehicle according to the New York Times. 

USD/JPY dropped below 118.00 and bottomed at 117.45. Then rebounded and it was trading at 117.85, 30 pips below yesterday’s closing price. Equity prices turned lower after the reports of the incident while the value of gold rose $10 to fresh daily highs at $1141. 

Six weeks of gains 

Despite the recent pullback, the US dollar is consolidating important weekly gains versus the Japanese currency. USD/JPY is about to post the sixth consecutive weekly gain. The rally has been supported by rising US bond yields. During the current week the pair received a boost after the Federal Reserve rose rates and signaled a potential three rate hikes during 2017. 

The last time USD/JPY rose for six week in a row was in 2014. Since the US presidential elections the pair has risen almost 1500 pips. Greenback is still down for the year against the yen, but is only 230 pips away from the level it opened back in January 2016.