In the New York FX market, USD/JPY is trading in the ¥159 range, and US developments are increasingly likely to drive the market rather than domestic factors. Ahead of Chair Warsh's speech, markets continue to search for direction.
The dollar is dominant on the downside during overseas trading hours, but USD/JPY continues to hold in the ¥159 range. With Chair Warsh's speech at Jackson Hole tomorrow approaching, there has been no decisive move in either direction, and markets remain in wait-and-see mode.
A strategist at a major European bank said that, as the effects of recent foreign exchange intervention fade, the yen is increasingly likely to be driven by US developments rather than domestic factors. The strategist expects fundamentals, including the US-Japan interest-rate differential, to once again become market drivers.
The dollar is expected to support USD/JPY for the time being, based on the view that the US economy remains firm and that the Federal Reserve could move to raise interest rates in the near future. However, the strategist said that dollar strength could lose momentum if upcoming US economic data are strong enough to justify keeping policy rates unchanged.
Although expectations for a Bank of Japan rate hike in September are rising, it has been pointed out that the Fed's policy outlook and US economic data will be more important drivers of USD/JPY's direction.
The article cites the following market reference rates: USD/JPY 159.36, EUR/JPY 185.68, GBP/JPY 216.57, and AUD/JPY 114.62.