Analysis of the movement of the USD/JPY exchange rate in 1 minute, the background of the strengthening yen in the Tokyo foreign exchange market on August 28th, 2024.
1. Speculation of a rate cut in the USA leading to a strengthening yen.
Speculation of a rate cut at the September FOMC is important.
This is one of the main factors behind the weakening of the dollar and the strengthening of the yen.
As the possibility of a rate cut by the United States increases, the decline in the dollar's interest rates undermines its attractiveness in the market and leads to selling pressure on the dollar.
It is believed that the release of US economic statistics below expectations and the signs of economic slowdown have further strengthened this speculation.
When US economic indicators are weak, the possibility of a preemptive rate cut by the FOMC increases, which in turn promotes selling of the dollar and buying of the yen.
In particular, amid an increasing risk aversion sentiment, there is a tendency for the yen, considered a safe haven asset, to be bought, leading to further strengthening of the yen.
2. The policy stance of the Bank of Japan and its impact
The market is paying attention to the speech of Deputy Governor Norio Himi.
Deputy Governor Himi is not expected to make remarks aimed at guiding the yen weaker, unlike Deputy Governor Shinichi Uchida, who is known as a dove.
The market may be taking a cautious stance against this and acting as a suppressive factor for the risk of yen appreciation.
However, if the Bank of Japan maintains its current easing policy without inducing further yen depreciation, there is a high possibility that the USD/JPY exchange rate will appreciate further due to the impact of expectations for interest rate cuts in the United States.
3. Outlook for the USD/JPY Exchange Rate
Considering the current situation, it is necessary to consider several scenarios for the future USD/JPY exchange rate.
- Key factors include FOMC decisions.
If there is a rate cut at the September FOMC meeting, there is a possibility that the USD will weaken further and the yen will appreciate.
In particular, if US economic indicators indicate further deterioration, there is a risk of a larger cut in interest rates.
- Depending on the response of the Bank of Japan
The response of the Bank of Japan and its future actions may have a significant impact on the USD/JPY exchange rate.
Depending on Deputy Governor Himino's stance, if there is no induction towards a weaker yen, there is a possibility that the trend of yen appreciation may be maintained, but market intervention to avoid excessive yen appreciation is also being considered.
Impact of geopolitical risks
When geopolitical risks, such as those in the Middle East, increase, there may be a strengthening of risk aversion movements, leading to further yen appreciation.
This aspect will also become a crucial factor in the future market developments.
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