Dollar-yen is likely to continue searching for direction. With Japanese and US policy events overlapping this week, the pair has fallen after rising into the upper 154-yen range, and volatile trading is expected to continue.
In New York trading on the 11th, dollar-yen rose to 154.48 yen before falling back to 153.24 yen and closing at 153.73 yen. Dollar buying accelerated as the US August CPI growth rate picked up and the probability of a rate hike increased, but subsequently eased temporarily as the preliminary University of Michigan Consumer Sentiment Index declined and crude oil prices continued to fall.
Dollar buying then resumed after Saudi Arabia's Ministry of Energy announced plans to close its East-West pipeline following multiple attacks. The movement in crude oil prices provided support, while Japanese and US monetary policy events are both scheduled for this week. The focus is expected to be on whether Governor Ueda signals consecutive rate hikes at his Bank of Japan press conference.
Speculation that the GPIF will review its asset allocation remains a potential yen-buying factor among market participants, and some say a break below the key 152-yen support level could lead to a decline to 147 yen. At the same time, with the tug-of-war over the Japanese-US interest-rate differential continuing, volatile and nervous trading is expected to persist.
Under these circumstances, developments ahead will need to be monitored closely, as Japanese and US policy developments and fluctuations in energy markets could affect the direction of foreign exchange rates.