The yen moved narrowly in the low ¥159 range per dollar. With slowing US retail sales and high oil prices pulling in opposite directions, the market has continued to lack a clear direction.
In the Tokyo market on the morning of the 17th, dollar-yen traded around ¥159.21–22, compared with ¥159.20–22 as of 8:30 a.m., showing little change. In US and European markets late last week, a decline in US retail sales coincided with indicators pointing to easing inflation, bringing yen buying and dollar selling into conflict with yen selling and dollar buying prompted by higher oil prices.
US retail sales fell 0.6% month on month, while the University of Michigan Consumer Sentiment Index came in below market expectations at 51.0. Expectations for an early US rate hike consequently receded, and there were periods when downward pressure on dollar-yen intensified. At the same time, concern about foreign-exchange intervention increased as the pair approached the ¥160 range.
The impact of the situation in the Middle East also remained significant. As the expiration of a memorandum aimed at ending fighting between the United States and Iran approached, uncertainty over control of the Strait of Hormuz persisted. Crude oil prices have remained at high levels, raising concern about a deterioration in Japan’s trade balance and weighing on the yen.
The euro was ¥184.27–28 against the yen and €1.1573–74 against the dollar, indicating yen weakness and euro strength. Many in the market expect subdued US personal consumption and high oil prices to continue depriving the yen of support, and believe dollar-yen will remain range-bound mainly in the ¥159 range for the time being.