With a possible BOJ rate hike and US monetary policy events ahead this week, the US dollar-yen rate is expected to trade in a ¥155-161 range, while attention is also focused on the possibility of renewed intervention to restrain yen weakness beyond ¥160.
Last week, the US dollar-yen rate at times rose to the mid-¥160 range, but no foreign exchange intervention was carried out. Although the rate moved little, the view is that the policy itself remains unchanged and that the authorities continue not to tolerate yen weakness beyond ¥160, with the lack of intervention reflecting only the absence of an appropriate timing.
The policy stance in both Japan and the United States remains aimed at preventing further yen weakness, and the basic view is that yen weakness substantially beyond ¥160 will not be tolerated. Intervention is considered likely to resume if yen weakness accelerates in the future.
This week brings numerous events, including a BOJ monetary policy announcement that may include a rate hike, the FOMC and the Evian Summit. The focus is on whether these events will generate momentum in the foreign exchange market. Particular attention is being paid to whether the BOJ will move toward a rate hike.
Market participants are also considering the possibility that, if intervention resumes, dollar selling and yen buying would often strengthen the yen in the short term.