Following the U.S. employment report released last weekend, the U.S. dollar saw a broad rise. However, as the new week started, there was a noticeable pullback in both USD/JPY (dollar-yen) and cross-yen currency pairs.
In the Tokyo market at the start of the week, USD/JPY began at a high of 149.12 yen, the highest since August. But after a comment by Finance Minister Mura that the government is “closely watching the forex market, including speculative moves,” there was concern about possible intervention to sell the dollar. As a result, USD/JPY fell to the lower 148 yen range. However, due to steady U.S. long-term interest rates, the dollar was bought again, recovering some ground. Still, the upward movement was limited, and as the New York market opened, the dollar fell again. Both USD/JPY and cross-yen currency pairs showed clear signs of correction from the previous weekend’s high.
The strength of last weekend’s employment report was surprising, confirming the strength of the U.S. economy. This reduced expectations for an early interest rate cut by the Federal Reserve (FRB). Additionally, rising oil prices due to the tense situation in the Middle East have increased inflation concerns, so for now, the dollar is expected to remain steady.
After the current round of selling pressure is over, we expect the market to test higher levels again, possibly with intervention playing a role. However, both the FRB’s stance on rate cuts and the Bank of Japan’s position on raising rates are important factors. In the long term, a downtrend is expected to continue.
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