In Tokyo foreign exchange trading at 3 p.m. on the 9th, the dollar traded in the low 158 yen range against the Japanese currency, slightly firmer versus late New York levels the previous day. With three-day weekends approaching in both Japan and the United States, along with next week’s release of the U.S. Consumer Price Index (CPI), a cautious stance dominated from the morning session. Activity thinned further in the afternoon, with the Tokyo session’s intraday range staying below 50 sen.
At 3 p.m., indicative quotes stood at 158.14–18 yen for dollar/yen, $1.1231–33 for euro/dollar, and 177.64–65 yen for euro/yen. The dollar had recovered marginally from 158.04–07 yen at 9 a.m., but remained essentially flat compared with 158.18–19 yen at 5 p.m. the previous day.
In overseas trading the prior day, the dollar softened to around 158 yen early in the U.S. session as long-term Treasury yields declined. It subsequently firmed to around 158.35 yen before tumbling to near 157.50 yen after President Trump signaled he would refrain from striking Iran ahead of the midterm elections. The dollar recovered to the 157.70–90 yen range late in the session, and Tokyo opened near those levels.
In the morning Tokyo session, real-demand buying lifted the dollar to the 158.10 yen area, but after the fixing, the pair slipped to the 157.70 yen level amid lower long-term U.S. yields in after-hours trading. Buybacks then emerged, and the dollar recovered to around 158.00–10 yen by midday. The afternoon saw continued rangebound trading around that level.
Market participants noted that “price action since the morning has been a round trip with little directional conviction.” Going forward, “with the market waiting for fresh catalysts, it will be difficult to move significantly in either direction,” one participant said.
On monetary policy expectations, the U.S. employment report released late last week dampened speculation of an October rate hike by the Federal Reserve, while expectations for a Bank of Japan hike in October have also failed to gain traction. As a result, dollar/yen is finding it difficult to establish direction based solely on Japanese and U.S. monetary policy factors.
Kumiko Ishikawa, senior analyst at Sony Financial Group, pointed out that euro weakness is currently in focus against the backdrop of French fiscal concerns. She noted that dollar/yen is more susceptible to euro movements than to Japan- or U.S.-specific factors, saying, “Dollar/yen has become a market that reflects whether the dollar or the yen is relatively stronger against the euro.”
Next week’s U.S. CPI and retail sales data will draw attention, but Ishikawa said that “unless the results are significant enough to materially alter the October policy outlook, the market impact will likely be temporary.”
On the Middle East, Trump stated in a social media post that the U.S. is “engaged in constructive talks with Iran” and that “the United States will not strike Iran at any point prior to the midterm elections on November 3.” This pushed crude oil futures lower, and with inflation concerns receding, long-term U.S. yields fell, prompting dollar selling against the yen.
That said, oil prices remain at elevated levels, and dollar/yen did not break below 157.50 yen, its recent low. Market voices suggest that “absent any major catalyst, the pair will continue to trade within the current 157.50–158.50 yen range.”
Some market participants are skeptical about the credibility of Trump’s remarks. The Middle East situation has not improved materially, with repeated tanker attacks in the Strait of Hormuz, and crude futures are resisting further declines. The possibility remains that the statement could be reversed, meaning geopolitical risk has not fully receded.
The euro firmed against both the yen and the dollar in the afternoon. At 3 p.m., the euro traded at 177.63–65 yen, up from 177.09–10 yen at 5 p.m. the previous day. Against the dollar, the euro strengthened to $1.1231–32 from around $1.1195 the prior day. Even with French fiscal concerns in the background, short-term euro buybacks prevailed.
The prevailing market view is that dollar/yen will continue to trade within a range bounded by 157.50 yen on the downside and 158.50 yen on the upside for the time being. With three-day weekends approaching in both Japan and the United States, positioning shifts are likely to remain limited, and directionless trading will probably persist until next week’s U.S. CPI release.
AloJapan.com