In the New York market on the 28th, dollar/yen again tested the upper and lower bounds and continued to move sideways around ¥157. The tug-of-war between US long-term yield trends and pressure from Japan and the US to prevent further yen weakness is expected to continue on the 29th.
In the New York market on the 28th, dollar/yen traded in a range of ¥156.85 to ¥157.60 and closed at ¥157.41. Factors supporting higher oil prices included reports concerning the US and the Middle East surrounding the Strait of Hormuz, as well as the Dallas Fed manufacturing activity index coming in above market expectations.
There were also reports that new information on negotiations related to Iran subsequently slowed the rise in oil prices and brought dollar buying to a pause. Along with movements on the 26th, dollar/yen remains susceptible to long-term yield trends and the impact of US policy.
The market is expected to continue searching for direction today, the 29th. While elevated US long-term yields are expected to support the dollar, caution over measures to prevent further yen weakness, expressed at the Japan-US leaders' and finance ministers' meetings, is expected to cap its upside. Attention should also be paid to the spillover from the Middle East situation into interest rates and the dollar through the oil market.
Buying has been observed in the currency options market in anticipation of a break out of the range after the weekend, and there is also a view that the market could move more easily if the standstill around ¥157 breaks.