The dollar's strength and the yen's weakness continued this week against a backdrop of expectations for US rate hikes. Following monetary policy events in Japan and the US, USD/JPY at times reached around the ¥158 level, while intervention concerns and the direction of various indicators will be in focus next week.
Dollar buying prevailed this week ahead of the Federal Open Market Committee (FOMC) and the Bank of Japan's monetary policy meeting, with the dollar temporarily rising into the upper ¥157 range. The yen's weakening momentum subsequently stalled at times against a backdrop of movements in crude oil prices and changes in geopolitical risks.
On the 23rd, a strong US composite PMI for September and comments by Fed Governor Barr regarding additional rate hikes supported dollar buying, lifting USD/JPY above the ¥158 level. In the latter half of the week, improved US initial jobless claims, stronger-than-expected new home sales and rising long-term Treasury yields accelerated dollar buying, with the pair at times approaching the ¥159 level.
On the 25th, the dollar remained firm against a backdrop of persistently high US interest rates, but its upside was capped by lower crude oil prices and intervention concerns. After getting through the week's monetary policy events in Japan and the US, the yen's weakening trend strengthened over the course of the week.
Looking ahead to next week, dollar buying may continue depending on expectations for additional US rate hikes and inflation indicators such as core PCE, while intervention concerns in Japan and the US are expected to cap the upside. The expected range is broadly ¥156–¥161, according to the view presented.