The yen weakened this week against a backdrop of movements in US long-term interest rates and FRB-related developments, with dollar-yen briefly recovering to ¥160 toward the weekend. Attention will continue to focus on the BOJ's response and US interest-rate trends.
The yen weakened this week amid movements in US long-term interest rates and a speech by Fed Chair Warsh at the Jackson Hole symposium. Dollar-yen initially traded in the upper ¥158 range but eventually recovered to the ¥160 range. The market reaction to intervention was limited, and price movements were subdued early in the week.
In the New York market on the 28th, dollar-yen closed at ¥160.09, exceeding the post-intervention rebound high. The focus thus shifted to whether the authorities would respond.
The US core PCE price index remained elevated at 3.3% year on year, indicating persistent inflationary pressure. A strong US jobs report is expected on 4 September, and some market participants believe that persistently high long-term interest rates could support dollar buying.
The Bank of Japan is expected to make an additional rate hike at its monetary policy meeting on 17-18 September, but market pricing has already progressed, and some market participants believe that yen selling will be restrained. Expectations of progress on a US fiscal consolidation program also remain a factor supporting dollar buying.