US jobs data at the end of last week temporarily accelerated dollar selling, but dollar-yen rebounded and moved above the previous level. The focus now is on how expectations for a rate hike at the US FOMC in December develop and on movements in the Japan-US interest-rate differential.
Weak US jobs data at the end of last week temporarily triggered broad dollar selling, sending dollar-yen down from the ¥157.60 range to ¥156.95. The pair subsequently rebounded after dollar selling ran its course and moved above its level before the jobs data was released. Expectations for a rate hike after the release initially fell from around 28% to around 13%, but later recovered to around 22%, bringing the selling to a halt.
Dollar-yen is viewed as being strongly supported by yen carry trades underpinned by the Japan-US interest-rate differential, and buying on dips is expected. The market continues to view the December FOMC as the most likely occasion for a rate hike, while price movements have regained stability.
Attention is focused on the US ISM Services PMI expected to be released today. After dollar selling temporarily halted following the jobs data, the indicator is unlikely to produce a major change in direction unless it diverges substantially from expectations.
Movements in the euro-dollar rate and the direction of euro-yen are also relevant, but caution is evident toward buying around the ¥158 level in dollar-yen. Market conditions are expected to continue favoring buying on dips, centered around the ¥157 range.