In the Tokyo foreign exchange market on the morning of the 28th, the yen weakened slightly. As of noon, the dollar-yen pair was trading around 157.88-91 yen per dollar, a few sen weaker for the yen and stronger for the dollar compared with 5 p.m. the previous day. Following the previous day’s US market where AI-related stocks such as tech and semiconductor shares were bought, the Nikkei Stock Average in the Tokyo stock market briefly rose as much as 900 points, and improved investor sentiment prompted selling of the yen, which is considered a low-risk currency.
Looking back at morning price action, the yen was firm early in the Tokyo session, inheriting the trend from overseas markets the previous day, and briefly recovered to the 158 range around 9 a.m. However, after 9 a.m., yen buying and dollar selling by real-demand players such as domestic exporters ahead of month-end became dominant, and the pair softened to the 157.70 range toward the 9:55 a.m. fixing. After the fixing, buying returned, and around noon the pair was back on a recovery path toward the 157.90 range.
Market participants said month-end real-demand flows “ended up being net selling,” while others noted that stock gains were supporting the dollar-yen pair. Price action since the morning lacked direction, and many expect little movement in the afternoon as participants strongly prefer to wait for the outcome of the Federal Open Market Committee (FOMC) meeting and the press conference by Fed Chair Warsh in the early hours of the following day.
Key currency levels as of noon were as follows.
| Currency Pair | As of Noon | vs. 5 p.m. Previous Day |
|---|---|---|
| Dollar/Yen | 157.88-91 yen | About 2-4 sen weaker yen, stronger dollar |
| Euro/Yen | 175.66-69 yen | About 50 sen stronger yen, weaker euro |
| Euro/Dollar | Around 1.1126 dollars | About 0.0034 dollars weaker euro, stronger dollar |
Note: Levels are based on noon quotes from various media outlets. Day-on-day comparisons vary due to differences in reference timing.
The euro rose against the yen. From the lower 176-yen range at 5 p.m. the previous day, the pair moved to the upper 175-yen range, with the yen strengthening and the euro weakening. Against the dollar, the euro weakened and the dollar strengthened, briefly hitting around 1.1121 dollars, a roughly two-week low. Euro selling and dollar buying dominated amid French fiscal concerns.
In the Tokyo market on the previous day, the 27th, the dollar-yen pair was range-bound in the upper 157 range at elevated levels. With few fresh trading cues, the Nikkei Stock Average briefly recorded gains of nearly 1,500 points, which pushed back risk-off sentiment and led to bouts of dollar buying and yen selling. Meanwhile, dollar buying by importers became dominant toward the fixing, and real-demand flows were mixed. A wait-and-see mood ahead of the FOMC outcome also spread, and directionless trading continued.
Behind this is uncertainty over US monetary policy. The market sees the FOMC outcome and Chair Warsh’s press conference as likely to determine the future direction of the dollar. If expectations for a rate-cutting phase strengthen, that would be a factor for dollar weakness and yen strength, while if a hold or hawkish stance is signaled, dollar buying could reignite. In addition, caution over fiscal management in Europe, including France, is capping the euro’s upside, and an environment in which the dollar tends to be relatively favored continues.
In terms of impact, the pass-through to Japanese consumer prices through higher import prices remains a concern. If the weak-yen, strong-dollar trend takes hold, it could put upward pressure on prices of items with high import dependence such as energy and food, potentially squeezing households’ real purchasing power. For exporters, it is a tailwind for improved profitability, while on the other hand, the yen-converted value of overseas sales expands, which can inflate apparent earnings. In the stock market, some say that as long as foreign exchange remains calm, the risk-on flow centered on AI-related stocks will be maintained.
Going forward, in addition to month-end and month-start real-demand flows, the focus will be on the FOMC outcome and the chair’s press conference, as well as US economic indicators. Many market participants expect the pair to trade in a narrow range between the mid- and upper-157 levels for the time being, and a wait-and-see stance is strengthening.
finance.biggo.com