Dollar-Yen Seesaws Between Safe-Haven Support and Intervention Caution

The dollar-yen pair is expected to find support from safe-haven dollar buying tied to Middle East tensions, but upside may be capped by diverging U.S.-Japan monetary policy directions and intervention wariness.

Market attention is focused on the August New York Fed Empire State Manufacturing Index, which is due for release on the 17th. The index is expected at 11.5, down from 15.6 in July, but even a below-consensus reading may be viewed as a buying opportunity on dips.

The dollar-yen pair plunged sharply following a coordinated Japan-U.S. yen-buying intervention executed on July 31, but has since retraced half of its decline due to safe-haven dollar buying and yen selling tied to concerns over fiscal deterioration from the Takahashi administration's expansionary fiscal policy.

Norihiro Takeuchi, an active trader, points out that the effect of the coordinated intervention is eroding day by day, and maintains a view that buy-on-dips will continue. He sees dollar-yen at 158.00-161.00 for this week's expected ranges, with upside resistance seen at 159.61 (daily Ichimoku baseline).