With monetary policy decisions in Japan and the US ahead, the dollar-yen pair is expected to remain range-bound in the Tokyo market. US interest-rate movements and any change in GPIF’s asset allocation will be key factors.
In New York trading on the 11th, the dollar-yen pair rose to around ¥154.48 before falling back to ¥153.24 as yields declined to around 4.90%, then climbed again into the 4.97% range and was bought back up to the ¥153.70 range. The euro-dollar pair initially fell as US yields rose, but recovered to around $1.1618 on subsequent buying.
The Tokyo market today is expected to adopt a wait-and-see stance ahead of the US FOMC (15–16) and the Bank of Japan’s monetary policy meeting (17–18).
The UK’s FT reported that a meeting of Gulf foreign ministers had been postponed, while information has emerged that the meeting could provide an opportunity to discuss management of the Strait of Hormuz. It was also explained that there would be no signed document.
Estimates indicate that, regardless of whether GPIF’s basic portfolio is changed, if a policy of encouraging investment in Japanese financial assets at the request of the Minister of Finance is implemented, it could create approximately ¥31 trillion in demand for the yen.
In IMM currency futures positions, yen short-covering totaled 103,023 contracts from the previous week, while net long positions stood at 10,796 contracts. The balance between yen short and long positions is roughly even.
According to FedWatch, based on fed funds futures movements, the probability that the FOMC will raise the fed funds rate by 0.25 percentage points at its meeting from tomorrow onward is estimated at approximately 86%, while the probability of leaving rates unchanged is approximately 14%.