USD/JPY is expected to trade in a ¥157-¥160 range this week, after subdued movement last week amid a widening US-Japan interest-rate differential and the impact of intervention. Going forward, oil-price trends and the outlook for US rate hikes are expected to be key.
USD/JPY remained subdued around ¥159 last week. With crude oil and energy prices continuing to remain elevated, rising US interest rates and the widening US-Japan interest-rate differential supported a stronger dollar and weaker yen. However, as the exchange rate approached ¥160, concerns about intervention by Japan intensified, making movement in either direction difficult.
Intervention was carried out near ¥155, after which USD/JPY rebounded toward a stronger dollar and weaker yen. The impact of intervention has moved in tandem with the widening US-Japan interest-rate differential, with higher oil prices and the outlook for US rate hikes thought to be underlying factors. Some believe the impact of intervention will be limited if high oil prices persist.
Some believe coordinated intervention by Japan and the United States will be key this week. Depending on whether new intervention is deemed necessary and on the US response, it may become more difficult to halt yen depreciation. The focus is whether coordinated intervention with the United States will take place.
It has also been pointed out that the 120-day moving average, at around ¥157, could be a turning point. In past instances, the yen strengthened after breaking below the 120-day moving average, so the positioning of hedge funds' short-yen positions could be key to a reversal toward yen strength. This week's forecast range is ¥157-¥160.