As caution grows ahead of another FOMC rate hike and the BOJ meeting in the New York market, USD/JPY is expected to remain heavy on the upside and trade mainly around the ¥156 level.
The Federal Open Market Committee (FOMC) signaled another rate hike before year-end and raised the target range for the federal funds rate by 0.25 percentage points to 3.75-4.00%, supporting the dollar. Against the backdrop of expected rate hikes in both the United States and Japan, EUR/USD has been trending lower.
In the Tokyo market, the Bank of Japan's monetary policy meeting is scheduled to take place, and expectations are growing that concern over the size and pace of additional rate hikes will cap USD/JPY on the upside. The market is becoming cautious amid expectations that the BOJ will raise its policy rate by 0.25 percentage points and could deliver 3 additional rate hikes by next spring.
The daily Ichimoku Kinko Hyo base line at ¥156.64 is being watched as an upside reference level for USD/JPY, while the area around the 50% retracement of the decline from the ¥160.39 high in early September is also cited as a reference point. Depending on developments, monetary policy in the United States and Japan could affect the yen exchange rate.
Past investor trends have prompted comments that a review of the GPIF's asset allocation could become a factor supporting yen buying. Depending on the hedge ratio for foreign securities investments, periods of yen buying or selling could emerge. The GPIF's actions are being watched as a potential factor affecting institutional investors as a whole.