Year-end markets can become very one-sided and that clearly has been the case in USD/JPY.
Book squaring by Japanese exporters for quarter-end and dollar-negative fixing flows are keeping the greenback weighed down. We trade now at 81.16, the lowest level since September 11.
Looking into early 2011, my gut tells me that interest rate differentials will reassert themselves and USD/JPY will rebound within its range, once seasonal factors wane and renewed speculative interest returns to the market with the new year.