As views spread that event risk is receding, dollar-yen is expected to become increasingly range-bound. This article reviews the actual market moves in New York on the 4th and the outlook for the 5th.
In the New York foreign exchange market on the 4th, dollar-yen rose to ¥158.67, then fell to ¥158.16 before closing at ¥158.46. Although the US October ADP employment report exceeded expectations and indicated a healthy labor market, the September trade deficit narrowed unexpectedly. Dollar buying therefore led the market initially, but the US October ISM Services PMI fell short of expectations, prompting declines in crude oil prices and long-term interest rates and limiting the dollar's gains.
In today's market on the 5th, event risk is seen as having receded following the US midterm elections. Selling of the dollar has been observed in the options market, and trading is expected to become increasingly range-bound. US stocks are holding at high levels against the backdrop of a divided Congress with the Democrats in control, while crude oil has plunged on expectations of easing tensions over Iran and long-term interest rates have also declined. Technically, the mid-¥158s are seen as an initial resistance level, while the ¥160 area is a key level where downward pressure on the dollar could readily re-emerge. Expectations of an ECB rate hike in Europe also make cross-yen movements a continued focus.