Dollar-yen is expected to continue probing higher with ¥160 in sight, with the previous day's high in the New York market and movements in US long-term yields cited as supporting factors. Domestic factors, including fiscal concerns and expectations for Bank of Japan policy, are also in focus.
In the foreign exchange market, dollar-yen is expected to probe higher with ¥160 in sight. It rose to ¥159.18 in the previous day's New York session, and is expected to remain firm around the ¥159 level during Tokyo trading. Dollar buying following the US Treasury's announcement of expanded Treasury buybacks has begun to ease, but persistent concerns about worsening fiscal conditions have once again turned the market's attention toward ¥160.
Movements in US long-term yields will remain in focus. Long-term yields, which briefly declined after the Treasury announced expanded buybacks, have begun rising again. The 10-year Treasury yield climbed to around 4.71%, while the 30-year yield rose to around 5.26%, with the widening US-Japan interest rate differential supporting dollar buying.
Strength in US economic indicators is also supporting the dollar. Initial jobless claims came in below market expectations, indicating continued resilience in labor market conditions. The August Philadelphia Fed business conditions index also came in above expectations, reaffirming the strength of the US economy.
Domestically, concerns about worsening fiscal conditions under the Takaichi administration's expansionary fiscal policy are creating yen-selling pressure. Although expectations are growing that the Bank of Japan will move to raise rates further at its September monetary policy meeting, the yen's depreciation trend has not yet been reversed.
During New York trading, the preliminary US PMI figures and other economic indicators are due for release. A sharp rise in US long-term yields could push dollar-yen higher again. Position adjustments ahead of the weekend and intervention concerns are also contributing to nervous market trading.