In Tokyo trading on the 23rd, the yen moved narrowly in the upper ¥156 range. Yen buying following the upside surprise in CPI ran its course, and the market adopted an increasingly wait-and-see stance ahead of next week's US and Japanese central bank meetings.
In Tokyo foreign-exchange trading on the 23rd, the yen moved within a narrow range. As of 3 p.m., dollar/yen stood at ¥156.88–¥156.90, with the dollar slightly firmer and the yen weaker than at the end of the previous day's New York session. The dollar fell to ¥156.08 in the morning on real-demand transactions, including dollar buying by importers, and at one point rebounded into the lower ¥157 range after real-demand trading ran its course. The pair then continued to trade within a narrow range in the afternoon.
Following the CPI release, headline, core and core-core inflation all rose more than 2% year on year, supporting expectations for an additional Bank of Japan rate hike and yen buying. However, dollar/yen found support around ¥156 and did not move toward further yen appreciation. Some dollar buying, particularly by importers, was also seen.
Shogo Kariya (苅谷 将吾), strategist at Minato Bank, said that the stability in share prices had left a lack of additional downside catalysts, while the lower boundary of the Ichimoku cloud was being viewed as support. Trading thinned in the afternoon, and ahead of next week's US and Japanese central bank monetary policy events, there was limited movement to take directional positions.
With next week's FOMC meeting and Bank of Japan meeting, as well as the US midterm elections, ahead, investors are expected to remain on the sidelines for some time. The structure in which real-demand buying by importers supports the downside while expectations for a Bank of Japan rate hike cap the upside remains intact, and the yen is expected to trade within a range as the market awaits the outcomes of the monetary policy events.