This week's dollar-yen outlook will focus on an RBA rate hike and developments in US economic indicators. Ahead of the US PCE deflator release, the dollar's reaction and the market's interest-rate outlook could fluctuate.
Factors on Tuesday the 29th included the Reserve Bank of Australia raising its policy rate from 4.35% to 4.60%. In the United States, August JOLTS job openings came in below market expectations, while the consumer confidence index declined. Following remarks by the New York Fed president, the probability of a rate hike in October temporarily declined.
The US August PCE deflator due for release today is expected to rise by approximately 3.7% year on year. With inflation concerns lingering because of persistently high oil prices, attention is focused on the dollar's reaction. Concerns that the upside could be capped if dollar-yen moves into the ¥158 range may intensify, and the market is expected to move depending on pricing in the interest-rate market. Depending on the results of each indicator, periods of dollar buying and yen buying could emerge.
Points to watch going forward include the release of US employment-related indicators and the PCE deflator, developments in concerns over intervention by Japan and the United States, and policy developments at the Bank of Japan and the Federal Reserve. Market participants are expected to assess the short-term direction depending on the PCE deflator reading while remaining alert to factors that could cap the upside if dollar-yen moves into the ¥158 range.
The short-term outlook for dollar-yen is likely to be sensitive to the PCE deflator result and movements in US long-term yields, and the pair may trade within a range from the mid-¥157s to the first half of the ¥158s. Policy developments in Japan and the United States and movements in oil prices will remain factors influencing the market.