In US and European markets on the 24th, USD/JPY is expected to struggle to rise. While expectations for progress on US fiscal consolidation are supporting the dollar, concerns over foreign exchange intervention around ¥160 remain strong. Movements in US interest rates and developments in the Middle East will also have an impact, with attention focused on the outlook.
USD/JPY is expected to struggle to rise in US and European markets on the 24th. Although uncertainty remains over the US Treasury's debt-management policy, dollar buying may emerge if the currency comes to be viewed as undervalued.
In the US PMI data, the manufacturing sector slowed, while the services sector pushed up the composite index, which was welcomed by the market and prompted initial dollar buying. However, if selling of US Treasuries driven by fiscal concerns becomes pronounced, the dollar's upside will be constrained. EUR/USD remained firm after falling below the 1.1660 level.
USD/JPY rose from the mid-¥158 range to around ¥159, but subsequently struggled to rise. In Asian markets at the start of the week, the view was expressed that dollar buying on its perceived undervaluation is likely to emerge while investors monitor US interest rates.
Movements in US interest rates and developments in the Middle East are cited as key factors to watch. Expectations for a fiscal consolidation program may curb excessive dollar selling, while an escalation in tensions between the United States and Iran could strengthen crude oil prices and prompt dollar buying. A wait-and-see mood is expected to spread ahead of the Federal Reserve chair's speech at the Jackson Hole meeting.