The dollar/yen pair has maintained its strength even after passing the US FOMC, the main event of the month. Even when the stock fell sharply after Fed Chairman Powell’s press conference, the stock was firmly supported at the turning point of the Ichimoku Kinko Hyo, reconfirming the firmness of the downside. There are several strong buy signals, such as Ichimoku Kinko Hyo SANYAKU turnaround, bullish perfect orders, and the Dow Theory uptrend, so from a technical point of view, it can be judged that the sentiment is “extremely strong.” Also, from a fundamentals perspective.

1. The US Fed’s hawkish inclination (the dot chart suggests a further significant interest rate hike within the year and denies a change in the rate cut in 2023 → extremely hawkish results).

2. The policy of continuing monetary easing by the Bank of Japan (it is highly probable that the Bank of Japan will decide to maintain the status quo of monetary policy at the Bank of Japan Monetary Policy Meeting to be announced today).

3. Differences in the direction of Japanese and U.S. monetary policies against the backdrop of (1) and (2) above (buying the dollar and selling the yen in line with the rapid widening of the nominal interest rate differential between Japan and the United States).

4. The stance of the U.S. government to tolerate a strong dollar, which will lead to curbing inflation.

5. There are factors suggesting the continuation of the strong dollar/weak yen trend, such as structural pressure to sell the yen due to the expansion of Japan’s trade deficit.

Based on the above, we continue to forecast a rise in the dollar-yen exchange rate as the main scenario. Attention will be focused on the Bank of Japan Monetary Policy Meeting, which will be announced today in Asian time. It is expected that the current monetary easing policy will be maintained, and it is expected that Governor Kuroda will not make any in-depth remarks on the exchange rate at his press conference. It is assumed (because there are some who expect YCC to be revised and Governor Kuroda to restrain the yen’s depreciation, there is a risk that if these are denied, it will lead to a storm of yen selling).

In addition, since several central banks such as the Swiss Central Bank and the Bank of England are scheduled to raise interest rates overseas, the cross yen will rise against the backdrop of the monetary policy gap between Japan and other countries → the dollar will appreciate against the yen. Investors also need to be careful with the current. Depending on the situation, the dollar/yen exchange rate may break above the high of 144.71 recorded immediately after the US FOMC, the high of 144.96 on September 14th, the high of 144.99 on September 7th, and the psychological milestone of 145.00. Be aware of upside risks.

Today’s expected range: 143.00-145.50.

Analyst: Mr. Naoto Arase, Independent Analyst