The dollar-yen rate remained in the ¥158 range this week. It tested the upside amid higher crude oil prices and concerns over US inflation, but expectations of a Bank of Japan rate hike weighed on it. US economic indicators and developments at the Bank of Japan and the FOMC are expected to be the focus next week.
The dollar-yen rate tested the upside this week against a backdrop of higher crude oil prices and concerns over US inflation, but remained trapped in a range around ¥158 after being capped by the 200-day moving average. It rose to ¥158.75 early in the week, but gains were capped as expectations of a Bank of Japan rate hike strengthened.
On the 13th, yen selling prevailed amid heightened tensions in the Middle East, higher crude oil prices and expectations that the Bank of Japan would defer a rate hike, pushing the dollar-yen rate into the mid-¥158 range. However, upside gains became limited following remarks by senior Federal Reserve officials. On the 14th, stronger-than-expected US CPI data increased pressure to buy dollars, but the Beige Book presented mixed findings and a decline in long-term interest rates erased much of the earlier advance.
On the 15th, US Treasuries were bought amid weakness in US retail sales and credit concerns related to AI, sending the dollar-yen rate down to ¥157.55. The high level of the producer price index subsequently helped the dollar recover, and over the weekend the dollar moved in the low ¥157 range as expectations surrounding a Bank of Japan rate hike and higher crude oil prices offset each other.
Next week, attention is expected to focus on US CPI and PPI trends, US housing starts due to be released on the 20th, and the US manufacturing and services PMIs due to be released on the 23rd. Dollar buying could resume depending on movements in European currencies, but market expectations are likely to broaden ahead of the Bank of Japan and FOMC meetings. The expected range is from the low ¥155s to around ¥161.