Expectations for a December rate hike strengthened following strong US employment data, and the dollar/yen remained firm. Expectations of a widening US-Japan interest-rate differential have once again come into focus.
In New York foreign exchange trading on the 6th, the dollar/yen traded in the low ¥158s, rising to ¥158.58 before falling back to ¥158.00, then rising again to close at ¥158.50. The US October employment report showed a decline in the unemployment rate and stronger-than-expected growth in nonfarm payrolls, confirming the strength of the labour market and strengthening expectations for a rate hike before year-end. The University of Michigan's preliminary consumer sentiment index exceeded expectations, but the dollar's gains were capped by a decline in inflation expectations.
The US dollar/yen is expected to remain firm today, the 9th, with strong employment data likely to reinforce expectations of a December rate hike. Dollar buying driven by expectations of a widening US-Japan interest-rate differential is likely to provide support, but US CPI and PPI data and Treasury auctions are scheduled for this week, and the inflation data are likely to determine the direction of interest rates and the dollar. Expectations of an additional Bank of Japan rate hike could also support the yen, while progress in the correction of AI-related stocks could trigger risk-averse yen buying.
Technically, the rate has recovered above its 200-day moving average, and attention is focused on a move to test the ¥159 level. However, as ¥160 is viewed as a line of defence, concerns about foreign exchange intervention may intensify and downward pressure on the dollar may persist. In Europe, fiscal and political concerns in France remain, warranting attention to selling pressure on the euro.