Dollar buying advanced against a backdrop of higher U.S. long-term interest rates, and dollar/yen rose temporarily to ¥158.30 as the U.S.-Japan interest-rate differential widened. With the BOJ governor's remarks the focus, the outlook for the market's next move will depend on those remarks.
In the New York market, expectations of domestic fund buying of the yen receded following some reports that the GPIF had not discussed reviewing its policy portfolio. U.S. 10-year Treasury yields rose temporarily to around 5.3472%, strengthening dollar buying against a backdrop of the widening U.S.-Japan interest-rate differential. The dollar rose to the session high of ¥158.30 (¥158.297), while the euro weakened against a backdrop of fiscal concerns and the dollar strengthened.
During Asian trading hours today, the 6th, some expect the dollar's upward trend to continue even as concerns about interest-rate hikes ease somewhat. Dollar/yen is expected to trade in the lower ¥157 range, and depending on the tone of the BOJ governor's remarks scheduled for this afternoon in the Tokyo market, short covering could resume and the pair could again test the ¥158 range. In European markets, German new orders and the UK construction PMI are among the scheduled releases, while the New York market will see the release of the U.S. trade balance and several speeches. The dollar's upside is expected to depend on developments related to U.S. interest rates.
The focus of this move is the content of the BOJ governor's remarks and how closely they align with policy expectations, making this a period for assessing whether yen selling will intensify. Market participants point out that depending on Governor Ueda's stance, concerns about yen short covering could strengthen, while U.S. data and developments in Europe are also cited as factors that will determine the dollar's direction.
Key points ahead include the market's reaction to the BOJ governor's remarks, as well as comments from the FRB vice chair and regional Federal Reserve Bank presidents and the release of U.S. data, all of which could influence dollar/yen's short-term movements. The market is expected to remain focused on developments in these factors rather than investment decisions.