USD/JPY is expected to remain firm this week ahead of monetary policy decisions by the US Federal Reserve and the Bank of Japan. Dollar-selling and yen-buying may ease at times as certain factors come into play.
USD/JPY is expected to remain firm this week and next, with market factors surrounding policy decisions likely to be the focus ahead of meetings by the Federal Open Market Committee (FOMC) and the Bank of Japan. The dollar's direction may change depending on economic indicators released from the 14th onward.
If the US CPI data heighten expectations that the FOMC will defer a rate hike, dollar selling may lead the market. However, the Federal Reserve is expected to maintain its tightening stance, and some market participants believe the dollar's decline will be limited. The Bank of Japan will hold a meeting on the 17th and 18th and is expected to raise its policy rate to 1.25%. Some also believe that yen-buying factors will have limited staying power because the move has already been largely priced in.
Stabilizing the situation in the Middle East remains a difficult prospect, while New York crude oil futures have broken above $100 per barrel for the first time in four months. If this is viewed as a source of inflationary pressure going forward, it could support dollar buying.
While uncertainty remains over the US economy, attention is focused on the release of the US September manufacturing and services PMI data on the 23rd and the trend in August durable goods orders on the 25th. The previous PMI readings were 53.9 for manufacturing and 56.5 for services. If both remain above 50, they could support dollar buying.