Dollar-yen is expected to struggle to rise in the U.S. and European foreign exchange markets on the 21st, while higher crude oil prices and movements in long-term U.S. interest rates will affect the dollar's momentum. Caution over coordinated intervention by Japan and the U.S. may cap the upside.
In Japan, the U.S. and Europe on the 21st, dollar-yen was expected to rise temporarily from the ¥157.80 range to the ¥158.20 range, while euro-dollar weakened from the $1.1260 range to the $1.1220 range. Movements in crude oil prices and long-term U.S. interest rates are supporting a dollar-buying bias.
Developments in peace negotiations in the Middle East are likely to keep crude oil prices elevated, and some expect the dollar to attract buying if oil prices remain high. At the same time, caution over coordinated intervention by Japan and the U.S. is cited as a factor weighing on the upside. Housing-related indicators were reportedly notably weak, but long-term interest rates resisted declines and the dollar recovered.
There are no particularly major scheduled events in overseas markets next week, and movements in crude oil prices and long-term U.S. interest rates are expected to provide the main cues. Reports that the Democratic Party is leading ahead of the 3 November midterm elections, along with expectations for fiscal consolidation, could affect the dollar. Expectations for an additional rate hike at the November FOMC have also receded, and the BOJ is expected to leave its policy rate unchanged, but caution over coordinated intervention by Japan and the U.S. is expected to continue.
Overall, dollar-yen is expected to remain within a limited range, with intervention concerns and developments in key indicators providing the main cues.