In the Tokyo foreign exchange market, the yen weakened slightly toward the upper ¥157 range. Risk appetite strengthened against the backdrop of higher stock prices, prompting dollar buying and yen selling.
In the Tokyo foreign exchange market on the morning of the 28th, dollar-yen was trading around ¥157.88 to ¥157.91 at noon, with the yen weaker and the dollar stronger than at 5 p.m. the previous day. Following buying of AI-related stocks in the US market the previous day, the Nikkei Stock Average briefly gained ¥900 in Tokyo, and improving investor sentiment prompted yen selling.
Trading was firm in the morning as the market followed the trend in overseas markets, but yen buying and dollar selling by participants with underlying demand ahead of month-end became dominant, sending the rate down to the ¥157.70 range toward the Tokyo fixing. After the fixing, buybacks came in and the rate recovered to the ¥157.90 range around noon.
The euro weakened against the dollar, while euro-yen moved to ¥175.66-¥175.69. Against the dollar, the euro weakened by approximately $0.0034, with the rate briefly falling to around $1.1121, its lowest level in approximately two weeks. Concerns about European fiscal conditions were a factor, and the yen strengthened against the euro.
The backdrop is uncertainty over US monetary policy. The FOMC decision and the Chair's press conference are expected to influence the dollar market going forward. Stronger expectations of a rate cut would be a factor for dollar weakness and yen strength, while a hold or hawkish stance could revive dollar buying. Attention is also focused on month-end and beginning-of-month underlying demand flows and the impact on import prices, with the rate expected to remain in the mid-to-upper ¥157 range.