FRB Chairman Jerome Powell’s speech, which attracted attention yesterday, suggested that the rate hike at the December FOMC meeting would be reduced. In response to this, the market strengthened the dollar selling reaction. He also pointed out the possibility of a rise in the terminal rate in the future, and firmly maintained the basic stance of continuing to raise interest rates until inflation is curbed.
Although no additional factors were seen in terms of content, the market was raising expectations for a 50bp rate hike at the December FOMC meeting, and the US dollar was sold as yields on US Treasury bonds declined. Recently, the dollar exchange rate has formed a short-term downtrend, and this trend has been confirmed.
The December market has finally entered, but this year’s dollar-yen exchange rate has actually formed a wide range of 38.48 yen, from the low of 113.47 on January 24th to the high of 151.95 on October 21st. It goes without saying that behind the rapid rise in interest rates from March to October was the widening interest rate differential between the Japanese and US financial authorities. However, according to the rule of thumb, there were many cases in which the dollar’s strength reversed halfway through the US interest rate hike. The current situation seems to be entering that stage.
As for the downside of the dollar/yen, the half price level of the range is 132.71 level. Also, the 200-day moving average has moved up to the 134.43 level. It seems that the level is not so far from the current 136 yen level. Overshoots are common in the market, but it seems to be a level that you want to keep in mind.
Continued US dollar selling. Current position is selling USDCHF only.