In the Tokyo foreign exchange market early on the 29th, the yen moved narrowly in the upper ¥157 range. With the BOJ meeting approaching, expectations for a US rate hike are pulling in opposite directions.
The dollar-yen rate was trading at ¥157.75-76 early on the 29th, with the yen 3 sen stronger against the dollar than at 17:00 the previous day. With the Bank of Japan's monetary policy meeting scheduled for the following day, 30th, yen-buying and dollar-selling, along with expectations for an additional US rate hike, capped the yen's upside. The dollar rose in overseas markets the previous day, but its gains were capped after it was blocked by a technical resistance zone.
At the FOMC through the 28th, the Federal Reserve kept the federal funds target range at 3.75-4.00%, maintaining its concerns over elevated prices. Chair Warsh said that inflation remained "too high," while leaving the possibility of an additional rate hike open. Expectations for a rate hike at the next meeting in December have strengthened in the market, with the probability rising to nearly 80%.
In Japan, the Bank of Japan will hold a monetary policy meeting on the 29th-30th. The prevailing market view is that policy will remain unchanged, but expectations for a rate hike could strengthen if the outlook for prices in the next fiscal year is raised in the Outlook Report or elsewhere. Core CPI in September was up 3.2% year on year, exceeding the 2% target, and price trends are expected to be a focus.
The dollar-yen rate is currently moving in the mid-to-upper ¥157 range, while the euro-yen rate is trading in the lower ¥176 range. Going forward, the market is expected to test technical resistance levels depending on developments at the Bank of Japan and US interest-rate trends. Oil prices and US long-term interest rates will also continue to be monitored as factors affecting the market.