This week, USD/JPY remained stuck in a narrow range around ¥158, influenced by expectations for US and Japanese monetary policy and uncertainty over the situation in the Middle East. Next week, higher US rates and intervention concerns are expected to support dollar buying, while the retreat in expectations for a BOJ rate hike is also likely to limit moves in the yen.
This week (5–9 October), USD/JPY remained stuck around ¥158 as US long-term interest rates and uncertainty over the situations in the Middle East and Europe intersected. At the start of the week, the dollar rose to around ¥158.30, but dollar buying receded after the US ISM Services PMI came in below expectations, pushing the pair back to the mid-¥157 range.
On 6 October, the yen weakened temporarily as long-term interest rates fell and the BOJ governor made comments. On 7 October, long-term rates rose again at one point, but strong demand at the US 10-year Treasury auction and the FOMC minutes indicating support for rate hikes limited downside.
Dollar buying prevailed on 8 October, but the dollar turned lower again as crude oil prices retreated from their highs, pushing the pair back to ¥157.52.
Toward the end of the week, concerns over intervention under Prime Minister Takaichi eased, although dollar buying prevailed at times as US long-term rates rose during New York trading. Late on 9 October, moves were limited by the impact of US consumer-related data, and trading continued around ¥158.
Next week, the pair is expected to remain relatively firm, although intervention concerns will persist. While the trend toward higher US rates and a stronger dollar may continue, there may also be periods in which the yen is vulnerable to selling, depending on concerns over Japan's fiscal management and movements in the US-Japan interest-rate differential. The expected range is approximately ¥155.00–¥161.00.