USD/JPY is expected to trade nervously around ¥158 in today's New York session, with active trading likely to be restrained ahead of tomorrow's US employment report. Developments in the Middle East and US long-term interest rates will also be closely watched as market factors.
USD/JPY is expected to trade nervously around ¥158 in today's New York session, with active trading likely to be restrained ahead of the employment report. The political situation following the US midterm elections, the outlook for peace talks and uncertainty in US-China relations are weighing on the market.
The Democrats' gain of majorities in both chambers in the US midterm elections has created uncertainty over the outlook for fiscal policy, while US Treasury yields have declined. This is one factor capping the dollar's upside.
In terms of monetary policy, views on the Federal Reserve's future policy stance have shifted, and speculation has spread in the market that the probability of a 25bp rate hike at the December FOMC meeting has risen to around 80%. The US October employment report due tomorrow is expected to show a 60,000 month-on-month increase in nonfarm payrolls and an unemployment rate of 4.2%.
In Japan, expectations of an additional Bank of Japan rate hike could support the yen, while the government and the Ministry of Finance continue to maintain a stance of being prepared to take additional measures as necessary. Expectations of easing tensions in the Middle East and oil-price movements are also cited as factors that could influence the dollar.