As the BOJ's Monetary Policy Meeting gets fully under way from today, the U.S. dollar/Japanese yen is expected to trade nervously around the ¥158 level, with U.S.-Japan interest-rate trends and expectations surrounding the meeting likely to influence the yen.
In the New York market as of 8:12, dollar/yen rose to ¥158.35 before falling back to ¥157.80 at the close. Dollar buying was dominant against a backdrop of the possibility of military action against Iran following the midterm elections and rising interest rates driven by higher oil prices, but dollar buying receded amid the Iranian foreign minister's stance favoring a diplomatic solution and the FOMC's decision to leave rates unchanged.
U.S. markets are expected to trade nervously from today onward ahead of the BOJ meeting, with dollar movements driven by the U.S.-Japan interest-rate differential likely to continue. Selling on rallies is likely around the ¥158 level, and expectations that ¥160 could be viewed as the BOJ's defense line may influence the yen market.
The ECB Governing Council meeting is also scheduled, and attention is warranted on euro movements, including President Lagarde's press conference. Reports concerning the situation in the Middle East and their impact on oil prices will also remain a source of volatility.