Dollar/yen is expected to remain caught next week between Japan-US rate-hike expectations and intervention concerns, with US CPI serving as a guide. The expected range is ¥156.50–¥159.50. Some market participants believe concerns over foreign-exchange intervention will intensify near ¥160.
In the foreign exchange market next week, the release of the US Consumer Price Index (CPI) is expected to be the main turning point as the market assesses changes in Japan-US rate-hike expectations. The market is said to assign an expectation of slightly more than 80% to rates being left unchanged at the October FOMC, while a stronger-than-expected CPI could intensify dollar buying and yen selling.
Dollar/yen is expected to face resistance as intervention concerns increase when it approaches ¥160, with the expected range seen at ¥156.50–¥159.50. Euro/dollar movements have also been cited as a background factor, and intervention risk could form a psychological threshold.
Among Japan-specific factors, remarks by BOJ Policy Board Member Junko Koeda (小枝 淳子) on the 15th are seen as providing a gauge of the central bank's rate-hike stance. Deputy Governor Uchida is scheduled to read a prepared address on the 16th, which will also provide a basis for assessing the overall rate-hike outlook. Higher oil prices and European debt issues have also been cited as factors that could affect dollar/yen.
Next week, the market will assess changes in rate-hike expectations in both Japan and the US through the US CPI release and remarks by BOJ officials. Oil price movements and geopolitical risks could act as sources of disruption.