The US Treasury outlined measures to curb the rise in long-term interest rates, sending USD/JPY back to the ¥158 range. With remarks by the Fed chair expected this week, the pair is likely to trade within a ¥158–¥161 range.
Last week, after the US Treasury indicated it was taking steps to curb the rise in long-term interest rates, USD/JPY rose as high as ¥159.7 before turning lower and settling in the ¥158 range. The announcement of measures to contain long-term interest rates marked a turning point for the market and also affected the US-Japan interest-rate differential.
While the US-Japan interest-rate differential continues to narrow, some analysts believe that trends in Japan’s long-term interest rates will be key to the yen. A decline in US long-term interest rates is thought likely to lead to lower long-term interest rates in Japan, and the impact of maintaining fiscal discipline is also being closely watched.
This week’s focus is on what the Fed chair will say in Jackson Hole on the 28th and the correlation between US and Japanese interest-rate trends. Many market participants believe that significant moves are unlikely, and are projecting a ¥158–¥161 range for USD/JPY this week.
The stance toward foreign-exchange intervention in Japan and the US, along with concerns about fiscal discipline, has been cited as a factor that could halt the yen’s historic weakness. Going forward, attention will also focus on how efforts to prevent a rise in US long-term interest rates affect the yen.