Monday the U.S. dollar saw gains slightly against the Yen, following last week’s revival of the currency. The rebound was due in part to Federal Reserve policymakers placing their support behind increasing the interest rate more times than investors has previously projected. Those comments aided the USD’s recovery from earlier this month when the central bank officially lowered its projected amount of rate increased from 4 to 2 throughout the rest of the year.
Data is to be released on Friday that will reveal to the market whether the U.S. economy is healthy and strong enough to withstand multiple rate increases through the end of the year. Indicators such as non-farm payrolls and manufacturing PMI are to be released before the week is over, and will expose some hidden strengths or weaknesses within the U.S. economy. In addition, the release of both the core personal consumption expenditures price index and Chicago purchasing management index later in the week could potentially have an impact on the strength of the dollar in relation to its peers.
As Fed Chair Janet Yellen is set to speak on Tuesday and New York Fed President William Dudley is scheduled to speak on Thursday, market strategists are preparing for further dollar movement. Shusuke Yamada, chief Japan FX Strategist at Bank of America Merrill Lynch in Tokyo, shared his thoughts on how the dollar can be affected by this weeks activities, “Statements by the Fed’s Yellen and Dudley will also be in focus. They are core Fed board members and dollar will be supported if they express hawkish views.”
However, other strategists and analysts within the market are taking the opposite stance and arguing that the dollar’s increases versus the yen will be downplayed in the near future. Shinji Kureda, head of FX trading group for Sumitomo Mitsui Banking Corporation in Tokyo, believes that Janet Yellen’s speech will not be as hawkish as some believe and will not mimic the recent announcements from other Fed policymakers. He believes Yellen will speak in a similar manner to the releases that came from the Federal Reserve’s most recent policy meeting.
Furthermore, Kureda does not believe that the yen will be weakened by foreign investment from Japanese institutional investors, as the currency tends to do every year around the middle of April. Kureda is quoted as saying, “I find it hard to believe that Japanese players have been actively selling the yen and taking on foreign exchange risk after the (BOJ’s) launch of negative interest rates.” He continues to say that Japanese investors are seemingly becoming more risk-averse following the central bank’s decision to deploy negative interest rates.