Next week's Tokyo foreign exchange market will focus on the U.S. employment report following the Jackson Hole symposium and concerns over Japan's fiscal position. Depending on the content of Fed Chair Warsh's speech, the short-term dollar-yen trend could shift again.
The dollar-yen has risen in August, with expectations surrounding the next fiscal year's budget and uncertainty over the situation in the Middle East prompting yen selling at the start of the week. On 25 August, position adjustments ahead of the U.S. July PCE price index and the Jackson Hole symposium led to dollar selling and yen buying, at times capping the dollar's upside, but the dollar-yen recovered on 26 August after the PCE price index came in slightly above expectations. On 27 August, dollar buying and yen selling intensified against the backdrop of rising crude oil prices.
Attention will focus on Fed Chair Warsh's speech at the Jackson Hole symposium, scheduled for 11:00 p.m. on 28 August. While expectations for a rate hike at the U.S. September FOMC meeting have receded, the possibility of a rate hike toward year-end remains on investors' radar. If the chair presents views on U.S. inflation and the direction of monetary policy going forward, the remarks could determine the short-term trend.
If the speech passes without causing a market reaction, next week will be driven by employment indicators, including the U.S. August employment report, the U.S. ISM manufacturing and non-manufacturing indexes, and the U.S. July trade balance. Strong results could intensify dollar buying, while the Beige Book will also provide a basis for market assessment.
Meanwhile, 31 August is the deadline for government ministries and agencies to submit their preliminary budget requests for the next fiscal year. If concerns over Japan's fiscal position increase, yen selling could accelerate. The dollar-yen is expected to have an upside near ¥162 and a downside near ¥155.20, with a relatively wide range anticipated because several important events are scheduled.