In overseas markets yesterday, USD/JPY dipped to around ¥158.93 before rising again on higher long-term U.S. Treasury yields and climbing to around ¥159.45. The market is expected to remain in wait-and-see mode ahead of the Jackson Hole meeting. The BOJ deputy governor's speech may fail to provide a clear market catalyst.
In overseas markets yesterday, USD/JPY briefly dipped to around ¥158.93, but dollar buying then intensified in line with rising long-term U.S. Treasury yields, pushing the pair to a new intraday high of around ¥159.45. EUR/USD movements were limited.
In the Tokyo market, USD/JPY is expected to be influenced by developments in the U.S. Treasury market, but a wait-and-see stance is likely to strengthen ahead of the speech by Fed Chair Warsh on the 22nd. The July personal consumption expenditures deflator was in line with market expectations, while the market reaction to the CPI and PPI was limited.
Underlying the market is Warsh's view that market-based financial signals should be prioritized over government statistics, as well as the fact that specific fiscal consolidation measures have yet to be decided. This is leaving the outlook for U.S. interest rates and the yen's response uncertain.
A speech by BOJ Deputy Governor Himino Ryozo (氷見野良三) is scheduled for around 10:30 a.m. Japan time today. Although expectations remain that the speech will lay the groundwork for a September rate hike, the yen's reaction is expected to be limited depending on its content. The prevailing view is that a sharp reversal in the yen's depreciation is unlikely unless there are signs of a major shift in BOJ policy.