With 1 month remaining before the US midterm elections, dollar-yen is trading in the ¥158 range. Although factors such as heightened tensions in the Middle East and rising long-term interest rates are present, the pair has not moved significantly, and the article reviews factors to watch for future yen appreciation.
Dollar-yen has traded mostly in the ¥158 range over the past week, with movement limited despite continued higher crude oil prices and elevated long-term interest rates. Although heightened tensions in the Middle East have had an impact, stability in US long-term interest rates is restraining the market. Houthi attacks on Saudi airports continue, while the market remains cautious immediately before the US midterm elections.
Although the September CPI and PPI results scheduled for release this week could cause localized movements, the prevailing view is that they are unlikely to establish an overall trend. The September CPI forecast is 3.6% year on year, core CPI is forecast at 2.5%, September PPI is expected to be flat year on year, and core PPI is expected to decline 4.4%. These indicators could affect the market's interest-rate outlook, but dollar-yen is expected to see limited major movement depending on developments at the Federal Reserve Board's October meeting.
There is also a view that a rate hike in December could support yen appreciation. Prime Minister Takaichi Sanae (高市 早苗) has denied the need for reflationary policies while emphasizing respect for the Bank of Japan's independence, and the market is carefully assessing when the Bank of Japan's policy shift may occur. If a rate hike is implemented unanimously in December, it could support yen appreciation.