US yields are expected to remain elevated this week, but dollar/yen is viewed as having limited upside. Attention will be required as the market responds to the FOMC’s hawkish stance, rising long-term yields and upcoming major economic data releases.
Fisco, an investment information provider, presents its outlook for dollar/yen this week. While caution is warranted over dollar/yen’s upside amid continued high US yields, a resurgence in dollar buying is also possible depending on inflation data.
The latest Federal Open Market Committee (FOMC) meeting signaled a hawkish policy stance, strengthening the upward trend in US long-term yields. The 10-year Treasury yield has risen to its highest level since 2007, and the environment for dollar buying is expected to continue.
The closely watched core PCE price index is expected to be flat year on year and higher month on month, with dollar buying focused on inflationary pressure expected to continue. Alongside expectations that short-term traders will continue buying dollars, some view the low 160s as an upside target.
Following the Japan-US summit, concern over currency intervention has increased, and dollar/yen is expected to face heavier resistance as it approaches ¥160. US fiscal and diplomatic developments have also been cited as market factors.
The US August core PCE price index is expected to be up 3.7% year on year and 0.3% month on month. The US September employment report is expected to show a 4.2% unemployment rate, a month-on-month increase of +104,000 in nonfarm payrolls, and a month-on-month increase of +0.3% in average hourly earnings.