In New York trading, the focus is expected to be on whether USD/JPY can hold above ¥159. With U.S. bond markets closed, there are few clues, and the market is expected to remain in wait-and-see mode for tonight's developments.
In New York trading, the focus is expected to be on whether USD/JPY can hold above ¥159. The prospect of higher U.S. interest rates following the October U.S. CPI report could provide support, but trading incentives are expected to be limited today because U.S. bond markets are closed. Factors likely to cap gains include rising expectations for an additional Bank of Japan rate hike, as well as verbal warnings against dollar strength and yen weakness and concerns about intervention if USD/JPY moves above ¥159.
In Japan, expectations for an additional rate hike at the BOJ's December Monetary Policy Meeting remain elevated and are seen as a factor limiting gains in USD/JPY. Although the view supporting an unchanged policy at the October meeting was a surprise, expectations for an additional rate hike remain strong as recognition spreads that the inflation rate is consistent with the 2% target. These expectations could influence the yen through movements in the U.S.-Japan interest-rate differential.
As for the projected range, the upside for USD/JPY is seen at the 2 September high of ¥160.39 if it exceeds the 31 August low of ¥159.48, while the downside is seen at the low of ¥157.87 on the 10th.