In the Tokyo foreign exchange market on the morning of the 23rd, the yen rose to the lower 156 range against the dollar. As of 10 a.m., it was trading at 156.46-47 yen, up 76 sen from the previous day in yen strength and dollar weakness. Against the euro, the yen strengthened 1.08 yen from the previous day to 175.55-56 yen per euro.
Behind the yen buying was a decline in U.S. artificial intelligence (AI)-related stocks. The stock selloff pushed U.S. long-term interest rates lower, triggering dollar selling and yen buying on expectations that the Japan-U.S. interest rate differential would narrow. Market participants noted that “attention is also focused on the Bank of Japan’s Monetary Policy Meeting scheduled for next week.”
In the Tokyo market the previous day, the 22nd, the dollar-yen pair was trading in the lower 158 range. Dollar buying was supported by U.S. long-term interest rates holding at a high level in the 5% range, while Bank of Japan Deputy Governor Ryozo Himino was seen expressing concern about delays in adjusting monetary easing, fueling speculation of an additional rate hike as a factor supporting yen buying.
Currency PairMorning of the 23rd, 10 a.m.Change from Previous DayDollar-Yen156.46-47 yen76 sen yen strength, dollar weaknessEuro-Yen175.55-56 yen1.08 yen yen strength, euro weakness
Note: Change from previous day is measured on a yen basis.
With the Bank of Japan’s Monetary Policy Meeting coming up next week, market participants are increasingly focused on gauging the pace of monetary normalization. If officials inclined toward adjusting easing make a series of remarks, yen buying could accelerate further.
On the other hand, many still believe that if U.S. long-term interest rates remain elevated, the dollar will be difficult to sell, keeping any yen appreciation limited. The direction of AI-related stocks and the trajectory of U.S. interest rates are likely to dictate the dollar-yen exchange rate for the time being.