USD/JPY seen volatile on risk sentiments

As Japan's risk sentiment stabilized, USD/JPY recovered from 116 to 117- 118 starting this week. With markets focus on developments in CNY and crude oil markets, JPY remains prone to overall fluctuations in global risk sentiments on limited data and events in Japan in this week.

A recovery in risk sentiment is likely to reverse some of the flight to-safety appreciation of the yen and speculation about the forthcoming BoJ meeting on 29 January is expected to provide momentum to the pair.

"We do not expect further BoJ easing and advise caution against chasing USDJPY upside, given the still fragile risk environment. Furthermore, the recent dovish rhetoric expressed by both hawkish and dovish participants of the FOMC suggests that the USD may not provide much support for the USD/JPY either" - Barclays