The yen was little changed in the Tokyo foreign exchange market on the 23rd. At 3 p.m., the dollar-yen stood at 156.88-90 yen, slightly firmer for the dollar and weaker for the yen compared with the previous day’s late New York level of 156.76-77 yen. After yen buying pushed the pair down to 156.08 yen in the morning, it was pushed back to the lower 157 range by real-demand flows including dollar buying from importers. With real-demand trading running its course in the afternoon, the pair moved in a narrow range around 157, lacking clear direction.
In the morning, the yen was bought as a safe-haven play as the Nikkei Stock Average fell more than 1,000 points in the Tokyo stock market. In addition, the National Consumer Price Index (CPI) released the same day showed headline, core and core-core inflation all rising more than 2% year on year, reinforcing expectations that the Bank of Japan will raise interest rates further and supporting yen buying. Still, the dollar-yen pair found a floor near 156 and did not extend its yen gains. Having fallen to its lowest level in five weeks, the pair attracted bargain-hunting dollar buying, particularly from importers.
Shogo Kariya, a strategist at Minato Bank, noted that stocks had regained their composure and said there was a lack of catalysts to test further downside, adding that the lower edge of the Ichimoku cloud may have been watched as support.
In the afternoon, trading thinned further, with position-taking limited ahead of next week’s monetary policy events at both the US Federal Reserve and the Bank of Japan.
Major currency moves were as follows:
| Currency Pair | 3 p.m. | 9 a.m. | Previous Day 5 p.m. NY |
|---|---|---|---|
| Dollar/Yen | 156.88/156.90 | 156.54/156.55 | 156.76/156.77 |
| Euro/Dollar | 1.1210/1.1212 | 1.1220/1.1222 | 1.1214/1.1217 |
| Euro/Yen | 175.89/175.90 | 175.63/175.69 | 175.81/175.84 |
Note: Units are yen; euro/dollar is in dollars. Figures are indicative quotes.
In the Tokyo market on the morning of the previous day, the 22nd, the yen was little changed in the lower 158 range against the dollar. With concerns over a deteriorating situation in the Middle East keeping crude oil futures biased higher, the market favored selling the yen and buying the dollar on worries about Japan’s trade balance. A rise in US long-term yields the previous day also weighed on the yen, while expectations of an early BOJ rate hike provided support, leaving traders without a decisive factor.
Bank of Japan Deputy Governor Ryozo Himino said at a lower house financial affairs committee meeting on the 21st that real interest rates are currently low and prices are prone to overshooting, and that a delay in adjusting monetary easing could lead to an economic downturn. Markets are predominantly of the view that the BOJ will hold off on a rate hike at its Oct. 29-30 policy meeting but will raise its policy rate at its December meeting, which is driving yen buying and dollar selling.
The yen is currently lacking direction as speculation over US and Japanese monetary policy is offset by concerns about a resurgence in US inflation via higher oil prices. With next week’s Federal Open Market Committee (FOMC) meeting, the BOJ meeting and the US midterm elections all looming, investors are likely to stay on the sidelines for now. Real-demand buying from importers is supporting the downside while BOJ rate-hike expectations are capping the upside, and breaking out of the range will require clarity on the outcome of the monetary policy events.
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