The dollar is expected to remain firm next week as expectations of higher U.S. interest rates build. The size of the FOMC rate hike and concern about intervention by Japan and the United States will be key points in the outlook.
Dollar-yen is expected to probe higher next week amid expectations of rising long-term U.S. yields, while concern about foreign-exchange intervention by the Bank of Japan and the government remains high. The move toward establishing dollar-yen above ¥160 and the risk of intervention are expected to contend with each other. An upside surprise in October CPI and comments by Governor Waller that a substantial 0.50% rate hike could be considered depending on conditions strengthened market expectations for a rate hike, making the December FOMC meeting the focus.
Euro-dollar is expected to remain under pressure on the upside as the dollar's strength continues amid expectations of higher U.S. interest rates. In Europe, concerns about fiscal management and political uncertainty are points to watch, and a renewed widening of European bond yield differentials could weigh on the euro.
In the review of the week of 9 November, dollar-yen fell to ¥157.67 before rebounding on the back of favorable U.S. CPI data and rising temporarily to ¥160.05 toward the end of the week. Euro-dollar rose to $1.1251 before falling back to $1.1046 under dollar-buying pressure, renewing its year-to-date low.