Following the modest gain the previous day, USD/JPY traded cautiously ahead of Fed Chair Warsh’s speech. Depending on comments from today onward, the market also expects USD/JPY could test ¥160.
The dollar led trading higher at times in the foreign exchange market on the morning of the 27th. The fact that BOJ Deputy Governor Himino (氷見野) did not specify the timing or pace of rate hikes in his speech became a factor limiting the yen’s movement. Together with the rise in long-term interest rates, this pushed the dollar into the upper ¥159 range. From today onward, however, attention shifted to Fed Chair Warsh’s speech, with the market focused on whether it would provide clues about a September rate hike.
Federal Reserve Bank of Kansas City President Schmid said at Jackson Hole that “we have work to do,” suggesting that short-term interest rates may be at an accommodative level. Depending on the content of the Chair’s speech, market expectations for interest rates could shift, which is also expected to affect USD/JPY.
The ECB’s minutes from its July meeting said that further rate hikes were likely unless the inflation outlook improved substantially, but that rates would remain on hold for now. The market is watching how monetary policy develops in the US and Europe and how the outlook evolves based on incoming data.
In the US, initial jobless claims came in below expectations, suggesting that the labor market remains tight. The four-week moving average rose slightly in response. These economic indicators could affect the Fed’s policy outlook and serve as a factor influencing the dollar.