With North American markets closed and trading thin, developments in the US and Middle East and oil prices are expected to support the dollar.
The New York foreign exchange market is expected to see subdued trading volume today, as the impact of Columbus Day and Thanksgiving keeps market participation restrained. However, thin trading also carries the risk of sharp price swings depending on the news, and the fact that the US equity market is operating as usual could affect foreign exchange rates.
The turmoil in the Middle East is cited as a factor supporting USD/JPY. Meanwhile, oil futures moved in after-hours trading after President Trump announced an agreement on diesel supplies from Russia, but the supply volume and certainty of implementation remain unclear, so the market is unlikely to turn optimistic.
Heightened tensions in the Middle East have not prevented oil prices from rising, with after-hours WTI briefly falling to the $89 range before recovering to the $91 range. Persistently high energy prices could keep US long-term interest rates elevated and support dollar buying.
As concerns over European politics and fiscal policy also pose a risk of weighing on markets, market expectations regarding the consistency of Japanese and US policies and the government's stance on yen depreciation are expected to affect USD/JPY. Attention should also be paid to the possibility of larger price swings if new developments emerge amid thin trading.