USD/JPY was expected to struggle in European and U.S. foreign exchange trading on the 16th, as expectations of a U.S. rate hike collided with speculation over the Bank of Japan’s tightening stance. With crude oil prices rising on Middle East tensions, support for dollar buying is likely to remain limited.
USD/JPY was expected to struggle in European and U.S. foreign exchange trading on the 16th. While expectations of a U.S. rate hike increased, expectations that the Bank of Japan would maintain its tightening stance were seen restraining yen selling. EUR/USD softened from the 1.1550 range, while USD/JPY rose back into the ¥155 range.
In recent developments, expectations of an FOMC rate hike increased as inflation accelerated, although the rise in interest rates paused at times. Crude oil prices continued to rise following reports of a halt in Middle East oil supplies, and dollar buying may continue to be observed.
From today onward, the focus in overseas markets will shift to U.S. monetary policy. If the Federal Reserve raises its policy rate, dollar buying may lead the market. However, with 90% of the market already pricing in a rate hike, excessive dollar strength is likely to require caution. The market is expected to assess the Bank of Japan’s policy on accelerating monetary tightening, which should act as a factor limiting the dollar’s upside.
[Today’s European and U.S. Market Schedule] 18:00 Euro area industrial production (July), forecast -0.9%; 21:30 U.S. import price index (August), previous 5.9%; 23:00 U.S. NAHB housing market index (September), forecast 34; 27:00 FOMC rate decision (forecast 3.75%, previous 3.75%)