Weekly forex outlook: Dollar faces headwinds as U.S. rate hike expectations recede
The dollar is expected to face upside resistance against the yen next week as expectations fade for the Federal Reserve to hike rates further at its October meeting. The currency pair is forecast to trade between 156.50 and 159.00 yen.
New York Fed President Williams said in a speech on Sept. 29 that "the Fed decided to raise rates in September, so there is no need to act hastily at present," while Vice Chair Jefferson indicated on Oct. 1 that there is "no need to rush into additional rate hikes." Caution over U.S. monetary policy is likely to prevail as attention centers on the minutes of the Sept. 15-16 Federal Open Market Committee meeting, due out Oct. 7.
Domestically, Bank of Japan Governor Kazuo Ueda speaks at the National Securities Conference on Oct. 6, while a BOJ branch managers' meeting is set for Oct. 8. With September Tokyo Consumer Price Index (CPI) data released Oct. 2 showing persistent inflation, remarks at these events could fuel BOJ rate hike expectations and prompt yen buying on views that the U.S.-Japan interest rate differential will not widen anytime soon. Additionally, Finance Minister Satsuki Katayama's Sept. 29 press conference remarks - stating Japan will "continue to maintain close communication with U.S. authorities and work to maintain an orderly foreign exchange market" - add to recent verbal warnings against yen weakness from Japanese and U.S. officials, capping aggressive yen selling.
However, if U.S. Treasury yields continue to rise amid global inflation concerns and growing fiscal risks, the dollar could find support. Geopolitical uncertainty in the Middle East - underscored by an Oct. 1 Wall Street Journal report that "the United States will deploy a third carrier strike group and Marine vessels to the Middle East" - could also push oil prices higher, providing a further boost to the dollar.
Key U.S. economic releases next week include the September ISM Non-Manufacturing Index on Oct. 5, the August trade balance on Oct. 6, weekly jobless claims on Oct. 8, and the preliminary October University of Michigan Consumer Sentiment Index on Oct. 9. Japanese data due includes the September Consumer Confidence Index on Oct. 5, the August Monthly Labour Survey on Oct. 7, the August trade balance on Oct. 8, and August household spending on Oct. 9.
Source: MINKABU PRESS
*Translated by generative AI. Click here for the original article.
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