The end of the year has arrived and looking back, we can say that this was yet another crazy year, as inflation surged and central banks introduced the steepest policy tightening ever, which will continue early in 2023. The USD was surging until October, but then it went through a strong retreat, so let’s see how it ended up against the rest of the major currencies during 2022.

• USD vs EUR: +6.4%
• USD vs JPY: +16.2%
• USD vs GBP: +11.1%
• USD vs CHF: +1.9%
• USD vs CAD: +6.9%
• USD vs AUD: +7.0%
• USD vs NZD: +8.2%

So despite the crash in the last 2-03 months, the USD made some strong gains against all currencies, especially with double-digit percentages against the GBP and the JPY. It was a bit easier to hold long positions, although there have been were volatile episodes in between. In thinking back to how trading sentiment has behaved since August, it was even more apparent that the volatility swings and back-and-forth action were the dominant themes.

If I had to pick one dollar pair that has stood up, I would unfortunately go with the unimaginative one in USD/JPY. The pair had a monstrous rise after the break above 118 all the way to 150 (that’s 3,200 pips by the way), during which we saw Japan authorities intervene to buy up the yen for the first time since 1998 at around the 145 mark at first.

After that came the focus on softer inflation figures in the US and markets hoped for softer language from the Fed, in which Powell then delivered ahead of the FOMC meeting in December. That culminated with a drop in the pair towards 135 before the BOJ finally relented and tweaked its yield curve control policy, although policymakers cited “market functioning” as the main reason. However, traders took to the more “hawkish” decision with a drop to test the 16 June lows at 131.49 before we saw a bit of a bounce in the past week or so.