In today's European and US markets, USD/JPY is expected to show limited downside, while expectations for an early US rate hike have receded. The prevailing view is that the dollar's direction will depend on oil prices and the performance of cross-yen pairs.
A market commentary dated the 20th says that, as expectations for further increases in US interest rates have receded, aggressive selling of USD/JPY is unlikely to accelerate, and the pair is expected to show limited downside in the short term. It also notes that EUR/USD showed limited downside around $1.1210, while USD/JPY rose to the upper ¥158 range before losing momentum.
Oil prices surged at times amid concern that the conflict in the Middle East could become prolonged, and they are being closely watched as a source of inflationary pressure. Meanwhile, no hawkish message has yet been identified in the FRB's policy stance, and although long-term interest rates remained at elevated levels, their rise was contained.
Against this backdrop, dollar selling could intensify. However, the Bank of Japan's Monetary Policy Meeting is expected to maintain the current policy stance, and any rebound in the yen is expected to be limited. Overall, the market will continue to require close attention to the progress of dollar weakness and dollar selling, as well as the performance of cross-yen pairs.