In the New York market, dollar-yen was bought back into the ¥157 range before being pushed back down into the ¥156 range, where it remains. Yen appreciation is capping the upside for dollar-yen, and caution is intensifying ahead of next week's FOMC meeting and BOJ policy meeting.
In today's New York FX market, dollar-yen temporarily rebounded into the ¥157 range before returning to the ¥156 range. The dollar remains firm, while yen appreciation is capping the upside. Attention is turning to a break below the 200-day moving average, and some have suggested that if a move below ¥155 becomes a reality, the trend could reverse toward targeting ¥1,680 in the short term.
Some market participants believe that concerns over excessive investment related to AI and references to credit risks are behind the yen's appreciation. Buying of U.S. Treasuries as a safe-haven asset and the stabilization of U.S. interest rates are also weighing on dollar-yen. Some have also pointed to declines in IT and technology stocks as a factor driving yen appreciation.
There is a view that strong demand for Japanese government bonds is supporting the yen, with domestic and overseas investors increasing their purchases of JGBs. The latest 20-year JGB auction attracted the strongest demand on record, and rising domestic interest rates are seen as a factor behind the yen's appreciation. Expectations of yen appreciation have strengthened in the options market, with risk reversals at levels favoring yen appreciation.
With the Federal Open Market Committee (FOMC) and the BOJ policy meeting scheduled for next week, caution over yen appreciation is intensifying. At the same time, some believe that the yen's appreciation is mainly driven by the unwinding of new yen-buying positions, and the market is expected to monitor developments cautiously.