The dollar-yen pair is expected to lack a clear direction in Tokyo trading, centered around the low ¥158s, as markets respond to the release of US employment data and risks related to the situation in the Middle East. Ahead of next week's policy announcements by the Federal Reserve and the Bank of Japan, the assumed range is ¥157.50-¥158.60, with upside and downside levels becoming the market's focus.
In Tokyo trading on the 22nd, the dollar-yen pair is expected to lack a clear direction, centered around the low ¥158s. In overseas trading the previous day, lower crude oil prices pushed down long-term US Treasury yields and prompted yen buying, but dollar buying emerged and the currency recovered as tensions in the Middle East intensified. Market participants expect a range of ¥157.50-¥158.60, and with next week's monetary policy announcements from the US Federal Reserve and the Bank of Japan approaching, significant positioning is expected to remain limited.
Although the dollar-yen pair's upside was seen as heavy during the previous overseas session, some have pointed out that improving investor sentiment following US technology earnings could change demand for the dollar as a safe-haven asset. Heightened tensions in the Middle East and higher crude oil prices could support dollar demand. With the FOMC next week, few factors are expected to significantly change the monetary policy outlook, and the market's focus has shifted to the direction of US interest rates.
A weaker yen could affect corporate earnings through higher import prices, while potentially benefiting exporters. Finance Minister Katayama said that price increases were transitioning toward inflation accompanied by wage growth and expressed the view that government and Bank of Japan policies were not misaligned. If expectations for an additional Bank of Japan rate hike increase, there may also be periods when concern about yen-buying intervention rises.