Dollar strengthens against the Yen despite hopes of a US-Iran deal

• At 158.00, USD/JPY reaches its strongest level since 29 October before trading just below it.
• A stronger-than-expected ISM manufacturing reading helps the pair recover from its low.
• September wage figures on Thursday precede BoJ Governor Ueda’s Friday address at the IMF.

A move to 158.00 took USD/JPY to its highest level since 29 October, even as US-Iran diplomacy weighed on the dollar against the euro and the pound. The yen did not share in those gains against the dollar. When the dollar’s losses elsewhere were deepest, the pair briefly retreated to just above 157.50 before recovering to its high. It now trades a little below 158.00.

With almost all of Japan’s crude oil purchased overseas, the fall in oil prices prompted by US-Iran talks reduces the country’s import costs. Nevertheless, the yen weakened. The next Bank of Japan (BoJ) decision is not due until 17–18 December, leaving no scheduled change to the Japanese side of USD/JPY’s interest-rate differential for more than six weeks.

A decline in S&P Global’s final US manufacturing index, from 56.0 to 54.9, saw USD/JPY ease to just above 157.50. The subsequent Institute for Supply Management (ISM) manufacturing survey climbed to 55.5, exceeding the 54.6 forecast, and the pair recovered to a little below 158.00.

BoJ releases and US data shape the policy outlook

Due on Wednesday at 23:50 GMT, the BoJ’s meeting minutes come ahead of September wage figures at 23:30 GMT on Thursday. Annual wage growth is forecast at 3.8% for a second consecutive month. On Friday at 16:00 GMT, BoJ Governor Ueda is scheduled to deliver a lecture at the International Monetary Fund (IMF). All three will inform the BoJ’s December decision.

Following the Fed’s decision to keep rates at 3.75%-4.00% on 28 October, two US releases will bear on USD/JPY’s interest-rate differential. Wednesday’s ISM services index is due at 15:00 GMT, with a reading of 54.8 forecast after 54.9. Friday’s October payrolls report follows at 13:30 GMT, with 65K expected after 29K.

USD/JPY remains within its recent trading range

Following a recovery from September’s low just below 153.00, USD/JPY has traded between a little above 156.00 and close to 159.00 since late September. Within that range, the 50-day and 200-day exponential moving averages (EMA) sit less than a fifth of a yen apart. Since early October, the pair has moved across both averages on repeated occasions.

USD/JPY chart: 5-minute timeframe

USD/JPY chart: daily timeframe