USD/JPY is expected to continue trading mainly within its range, but US interest rate trends and the situation in Europe are being watched as sources of volatility, with concern over the risk of a range breakout said to be growing.
In overseas markets at the end of last week, USD/JPY briefly hit a low of 157.70 before rising to around 158.34, but it is said to have been pushed back to around 157.96 as the US 10-year Treasury yield fell to the 5.06% range.
In today's Tokyo market, USD/JPY is expected to trade mainly within its range. However, the direction of US long-term interest rates will be a key factor after US CPI and PPI exceeded market expectations, and could potentially weigh on USD/JPY's upside, it is said.
Regarding the Federal Reserve's interest rate policy, expectations for a rate cut at this month's FOMC are said to be weak, while the possibility of a rate hike in December is seen as remaining. The stance of the Japanese and US authorities toward curbing yen depreciation is also said to be a factor keeping USD/JPY within its range.
Meanwhile, protests expanded in France over the weekend, with at least 1,200 people said to have been arrested and an estimated 550,000 people taking to the streets. This could lead to further euro selling and dollar buying, and depending on whether euro weakness affects dollar buying or yen buying, there is said to be a risk of sharp moves in USD/JPY.