The yen strengthened in the foreign exchange market, with dollar-yen continuing to trade around the low ¥156 range. Expectations of a widening U.S.-Japan interest rate differential, higher oil prices and declines in AI-related stocks are among the factors behind the move. With announcements from the FOMC and the Bank of Japan's policy meeting due next week, choppy trading may continue.
The yen rebounded in the New York market on the 23rd, with the dollar ending trading at ¥156.75–85. Rising long-term U.S. Treasury yields fueled expectations of a wider U.S.-Japan interest rate differential, making yen selling and dollar buying dominant, although active trading was subdued ahead of the weekend.
Euro-yen rose for a fourth straight day, with the yen strengthening and the euro weakening, ending at ¥175.45–55 per euro. Fiscal concerns in France and the PMI data weighed on the euro, while Moody's Ratings' decision to maintain France's sovereign credit rating was also a factor.
The U.S. FOMC and the Bank of Japan's monetary policy meeting are scheduled for next week. With policy continuity expected, a sharp narrowing of the U.S.-Japan interest rate differential is difficult to envisage. Factors that could drive a dollar rebound and expectations of an upward revision to the Bank of Japan's inflation outlook may influence the yen's direction.
In long-term interest rates, the 10-year U.S. Treasury yield fell to around 4.99%, while Japan's yield declined to around 2.79%. Selling in AI-related stocks and higher oil prices acted as factors supporting both yen buying and dollar buying, and some expect modest trading centered around the ¥156 range to continue from next month onward.