Will the U.S. dollar/yen exchange rate target ¥160 again? U.S. monetary policy is driving unwanted dollar strength and yen weakness. The sharp rise in long-term U.S. yields, well above 5%, is fueling further dollar buying | Imai Masato (今井雅人)'s “What Now? What Comes Next? The Japanese Economy and the Global Economy”

At the Bank of Japan's Monetary Policy Meeting, a 0.25% rate hike was decided, and with no indication of another hike at the next meeting, the market reaction is said to have moved toward calm. It has also been pointed out that issues such as reviewing the GPIF's portfolio remain under consideration.

The U.S. Federal Open Market Committee implemented a 0.25% rate hike, and Federal Reserve Governor Barr has reportedly expressed the view that further policy adjustments are likely to be necessary to achieve the inflation target. In response, long-term U.S. yields have risen sharply, reaching levels slightly above 5%.

The U.S. dollar was bought in response to this move, and the U.S. dollar/yen exchange rate is said to have risen into the ¥158 range. The view has been reported that this reflects the impact of dollar strength more than yen weakness.

Looking ahead, the U.S. dollar/yen exchange rate is said to have the potential to target ¥160 again if dollar strength continues. It has also been suggested that the yen is unlikely to weaken significantly against the other major currencies, making it preferable to focus on dollar-cross trading.