The dollar-yen exchange rate remains focused on the outcome of the Bank of Japan meeting today and tomorrow. Movements following the FOMC and the possibility of an upward revision to the inflation and Outlook Report forecasts are expected to determine the market's direction.
The closely watched Federal Open Market Committee (FOMC) left its policy rate unchanged, while Chair Worsh said at his press conference that the committee was prepared to act as appropriate after accumulating information. Although the market expects the next rate hike, the dollar came under heavier selling pressure after the press conference, with the exchange rate nevertheless remaining within its recent range.
The market is now awaiting the Bank of Japan monetary policy meeting today and tomorrow, when the Outlook for Economic Activity and Prices (Outlook Report) will be released. Against the backdrop of rising crude oil prices, an upward revision to the inflation outlook is widely expected, and the extent of the revision will be a key focus. Depending on the outcome, expectations for future rate hikes could strengthen, potentially encouraging yen buying.
The dollar-yen exchange rate is expected to trade from the ¥157 range to the mid-¥158 range, with movement likely to be somewhat limited ahead of the Bank of Japan meeting. The ECB Governing Council's decision is also scheduled to be announced, and the focus will be on how much of the ECB's future rate-hike stance President Lagarde signals at her press conference. The euro-yen and euro-dollar exchange rates are expected to change depending on the press conference.
The broad trend today is expected to center on yen-related trading ahead of the Bank of Japan meeting, although developments at U.S. and European events could cause the market to move up or down.
Looking ahead, attention is focused on the extent of the upward revision to the Outlook Report and the resulting change in market expectations for rate hikes.