During New York trading, dollar-yen fell to the mid-156 range as yen weakness resurfaced after the Bank of Japan policy meeting produced a result different from market expectations. Expectations of additional Federal Reserve rate hikes are also being viewed as a factor behind yen weakness, while the structural causes of the yen’s decline remain firmly in place.
During New York trading, dollar-yen extended its decline to the mid-156 range. The tone of the Bank of Japan policy meeting did not appear as hawkish as the market had expected, intensifying the yen’s decline. The dollar rose briefly to the 158 range, but then plunged back into the 156 range. Reports also circulated that the Bank of Japan had conducted a rate check, and the authorities’ actions are being viewed as a warning signal against yen selling.
The Federal Reserve is said to have signaled additional rate hikes by adopting a hawkish stance at this week’s FOMC meeting. This has fueled expectations that the Bank of Japan’s tightening pace will slow, raising the risk that dollar-yen could again target 160. Thin trading during Japan’s Silver Week is also heightening caution over yen-buying intervention.
The interest-rate differential between Japan and the United States and concerns over Japan’s fiscal position are cited as structural factors behind yen weakness. Uncertainty remains over whether a one-off intervention can turn the yen’s decline into sustained yen appreciation.
Key foreign-exchange levels: USD/JPY 156.70, EUR/JPY 179.98, GBP/JPY 209.89, AUD/JPY 111.65
Uncertainty over the Bank of Japan’s policy direction and U.S. interest-rate trends is sustaining market caution, and the direction of the yen could shift again depending on developments ahead.