With expectations for a rate hike at the October FOMC easing and being priced in, dollar/yen is expected to remain capped in the Tokyo market. Market participants are expected to monitor mainly Japanese and US long-term interest rates and oil prices, along with technical levels and upcoming data.
In the previous day's New York market, dollar/yen fell to ¥156.95 before recovering to around ¥157.92 as US long-term interest rates rebounded. Euro/dollar fell as the interest-rate differential widened, then attracted some buying.
In the Tokyo market, with the Nikkei market in view today, dollar/yen is expected to remain at a high level but stay capped against the backdrop of easing expectations for a rate hike at the October FOMC. Japanese and US long-term interest rates and oil prices are expected to be the main drivers.
Key levels for dollar/yen include the Ichimoku conversion line at ¥157.71 and the 200-day moving average at ¥158.51, viewed as an upside guide. On the downside, the 26-day base line at ¥156.64 is considered an important level.
Regarding the Federal Reserve's interest-rate policy, the possibility of rate cuts or a hold is being discussed depending on upcoming data such as the CPI and employment report. Headlines concerning developments in the Middle East also warrant caution.