As the week progresses, investors should pay close attention to two key events that are likely to influence the value of the US dollar against the Japanese yen. According to DBS senior FX strategist Philip Wee, Bank of Japan Governor Kazuo Ueda is expected to reaffirm the plan to raise interest rates through Fiscal Year 2025 during a special parliamentary hearing on August 23. Meanwhile, Federal Reserve Chair Jerome Powell is set to address the market at the Kansas City Fed Jackson Hole Symposium from August 22-24, where he may hint at a 25 basis points rate cut at the upcoming FOMC meeting on September 18.
Despite recent concerns about a potential US recession, Powell is expected to reassure investors about the strength of the economy and the labor market, aiming to dispel any panic in the markets. Ueda, on the other hand, is unlikely to let the Nikkei’s ‘Black Monday’ sell-off on August 5 derail the BOJ’s optimistic economic and inflation forecasts announced on July 31.
Given these developments, the USD/JPY exchange rate is likely to face downward pressure once again, following a brief uptick from 141.70 on August 5 to 147.60 last Friday.
Analysis:
The upcoming meetings of the Federal Reserve and the Bank of Japan are crucial for the USD/JPY exchange rate. Powell’s comments at the Jackson Hole Symposium and Ueda’s stance on interest rates will shape market expectations and impact currency movements. Investors should closely monitor these events to gauge the future direction of the USD/JPY pair and adjust their investment strategies accordingly.