The dollar-yen is expected to move sharply in today's foreign exchange market, with the tug-of-war between US economic indicators and the Japan-US interest-rate differential as the focus.
In the New York foreign exchange market on the 11th, dollar-yen rose temporarily to ¥154.48 before falling back to ¥153.24 and closing at ¥153.73. The move is believed to have been driven by the acceleration in the US August CPI month on month and the pricing in of a rate hike at the September FOMC. While there were periods of stronger dollar buying, the momentum behind dollar buying temporarily eased as oil prices fell back.
Dollar buying subsequently resumed at times in response to oil-market developments, and a series of Japan-US monetary policy events are scheduled from today onward. While a rate hike at the US FOMC is increasingly being priced in, market attention is focused on whether Bank of Japan Governor Ueda will signal consecutive rate hikes at his press conference. Expectations of a review of GPIF's asset allocation continue to simmer in the market as a factor supporting yen buying. Some market participants expect a decline to ¥147 if the key ¥152 support level is broken, while others see a correction of around ¥20–22 from the July high.