Dollar-yen is trading between safe-haven buying driven by the Middle East situation and concerns about intervention, with the release of the August Empire State Manufacturing Index the market’s main focus. Attention is on how the pair will move if the index falls short of expectations.
In the New York market on the 17th, dollar-yen is expected to remain supported by the Middle East situation, while expectations for monetary policy in Japan and the US and concerns about intervention are likely to cap gains. The market is watching the August Empire State Manufacturing Index, due later that day, and will focus on the reaction if it falls short of expectations.
The August Empire State Manufacturing Index is expected to come in at the market forecast of 11.5, down from 15.6 in July. Dollar-yen has seen limited downside even as recent employment and inflation indicators have been weak, and more investors may view a weaker-than-expected index as an opportunity to buy on dips.
Differences in the interest-rate outlooks for Japan and the US, together with intervention concerns, are influencing dollar-yen. Expectations for a rate hike at the September FOMC have been trending lower, while views are growing that expectations for a Bank of Japan rate hike will affect the yen’s direction. IMM positioning continues to show a net short yen position.
Developments surrounding a ceasefire in the Middle East remain uncertain amid geopolitical risks, with the deadline for the interim ceasefire signed in June due to arrive on 16 August. The US Treasury secretary’s statement on measures against Iran and the possibility of coordinated intervention are heightening market concerns, and dollar-yen is expected to continue battling in the upper ¥159 range.