[Outlook] NY FX outlook: USD/JPY caught between intervention concerns in the ¥160 range and rising US interest rates

During New York trading, persistent dollar buying is expected against the backdrop of rising US long-term yields, while intervention concerns in the ¥160 range are expected to cap gains. In Tokyo trading, USD/JPY rose temporarily to ¥160.19, then fell to ¥159.66 after intervention concerns prompted concentrated buying before ¥160. It subsequently recovered to the ¥159.90 range, but is expected to remain sluggish ahead of the ¥160 milestone.

Prime Minister Takaichi Shinzo (高市晋三) has disclosed that he conveyed during the Japan-US summit that the yen's undervaluation is a problem, indicating a stance of working with the US to maintain an orderly foreign exchange market through close communication. Mimura (三村), the vice minister of finance who spoke on the 12th, also warned that the yen's decline gave the impression of progressing "too quickly," heightening concerns over official action in the ¥160 range as memories of coordinated intervention in the summer remain.

Against the backdrop of trends in US inflation indicators and comments from monetary officials, expectations for an additional rate hike at the December FOMC are increasing. Some market participants have cited the possibility of a 0.50% hike in addition to the usual 0.25%, and rising US long-term yields are seen as a factor supporting the dollar. Higher oil prices are also fueling inflation concerns, creating a risk that USD/JPY will again test the ¥160 range.

Position adjustments ahead of the weekend, as well as reports concerning US interest rates and the situation in the Middle East, also warrant attention. The outlook is for nervous trading to continue between dollar and yen buying, and the market will need to assess the reaction to official warnings in New York trading as well.

The projected range is cited as a high of ¥160.88 and a low of ¥159.04 for USD/JPY.