The USD/JPY pair experienced a significant correction of around 1.5% lately. The dollar retreated against the Japanese Yen, which resulted in the pair slipping from 148.25 to 145.30 as of today, December 7. The decline in the U.S. Treasury yields also contributed to the fall of the USD/JPY pair. The UST 10-year bond yield decreased from 4.36% to 4.20%, while the 2-year rate slid from 4.72% to 4.54%.

The Bank of Japan kept monetary policy largely unchanged at its last meeting, but formally expanded the YCC for Japan's 10-year government bonds to 1% and said it would be a reference cap. BoJ Governor Ueda reiterated that they will not hesitate to take easing measures if necessary and do not expect continued price increases. Japan's CPI shows that inflationary pressures are easing, but are still well above the Bank of Japan's 2% target.

The USD/JPY pair is not the only one affected by the fall in the greenback. The dollar also ended lower against Asian and emerging market currencies. USD/SGD fell to 1.3330 from 1.3377. A weaker US dollar also led to short covering in GBP, causing GBP (GBPUSD) to rise back above 1.2700 but back to 1.2568 from the previous close of 1.2620.

Despite the drop of the USD/JPY pair, the U.S. stocks rallied, and the Dollar Index (DXY) regained 0.27% to current 103.85 (103.55). The softer greenback saw the Australian Dollar (AUD/USD) rebound to 0.6673 from its open at 0.6559,but the Kiwi (New Zealand Dollar) edged lower to 0.6133 against Friday’s 0.6155.