The dollar-yen exchange rate briefly recovered to the ¥160 range this week before plunging on expectations of BOJ tightening, while dollar buying again prevailed toward the end of the week. Volatility is expected to increase next week ahead of policy decisions in Japan and the United States.
This week, from 31 August to 4 September, the dollar-yen exchange rate briefly recovered to the ¥160 range before sharply falling back to the ¥155 range on expectations of a BOJ rate hike and dovish remarks by senior Federal Reserve officials. Yen selling intensified at the start of the week during a speech by Fed Chair Warsh, but the exchange rate fluctuated in both directions in the second half depending on policy developments.
On the 2nd, oil prices rose after the United States resumed attacks on Iran, while the US 10-year Treasury yield climbed into the 4.8% range, extending the trend toward a stronger dollar and weaker yen. On the 3rd, reports emerged that the BOJ was likely to raise its policy rate by 0.25% at its meeting this month, accelerating yen buying. During New York trading, expectations of an early rate hike also receded at one point following remarks by Fed Governor Waller.
In New York trading on the 4th, the dollar-yen exchange rate recovered to ¥156.23 and closed there. Over the week as a whole, the exchange rate moved within a ¥146–¥160 range, with a rebound and unwinding from the post-intervention recovery highs remaining a latent market theme.
Policy decisions in Japan and the United States are scheduled for next week, and market movements driven by expectations of monetary tightening and interest-rate differentials may continue. The US PPI is scheduled for release on the 10th and CPI on the 11th, and the results are expected to affect the dollar’s direction.