Dollar near 158.33 yen as lower Treasury yields erode its appeal
Key Facts
The dollar faced pressure as U.S. Treasury yields and oil prices fell, reducing the U.S. currency's appeal, according to a Reuters report published on October 21. The report said the dollar was little changed at 158.33 yen during that session, while broader pressure on the U.S. currency persisted as yields and oil prices moved. Reuters linked the dollar's diminished appeal to those two factors as the United States and Japan prepared for monetary policy meetings in October. Against that U.S. backdrop, seasonally adjusted initial jobless claims totaled 194,000 in the week ended October 17, according to the data series published by the Federal Reserve Bank of St. Louis. That compared with 200,000 in the week ended October 10, marking a decline from the previous week.
In Japan, central bank Deputy Governor Ryozo Himino told parliament on October 21 that underlying inflation was now very close to the bank's target. Reuters quoted him as saying that "underlying inflation is very close to 2%," addressing price conditions while the September interest rate decision remained in effect. That decision sets the target for the uncollateralized overnight call rate at around 1.25%, according to the Bank of Japan's official statement. In its operating guideline, the bank said it "will encourage the uncollateralized overnight call rate to remain at around 1.25%." Despite the earlier rate increase, Himino described financial conditions as still accommodative, citing low real borrowing costs. He also pointed to strong bank lending growth as a sign of continued financial accommodation in the Japanese economy.
Himino identified sources of upward pressure on prices including input costs and activity linked to external demand, according to Reuters' account of his remarks. On costs, he cited higher fuel and raw material prices among the factors pushing prices up. On demand, he highlighted what he described as "strong global demand for artificial intelligence" and its connection to Japanese economic activity. He identified exports as one channel through which that demand has an impact, alongside capital expenditure. His remarks thus brought together pressures stemming from higher fuel and raw material costs and those linked to strong global demand for artificial intelligence activity through trade and investment.
Japanese trade data for September showed the value of both exports and imports rising from a year earlier, with imports growing faster, according to Japan's Ministry of Finance and Customs. Export values increased 16.7% from the same month a year earlier. Import values, meanwhile, rose 18.9%, as the trade deficit widened on a non-seasonally adjusted basis. The deficit totaled 536,558 million yen in September, according to the official trade release. That compared with a deficit of 277,703 million yen in September of the previous year, representing a 93.2% annual increase in the deficit. The trade gap widened despite growth in export values, as imports rose by more over the same comparison period.
The next milestones begin with the release of Japan's national consumer price index for September on October 23, according to the calendar on Japan's government statistics portal. The calendar scheduled the release for 08:30 Japan time, ahead of the U.S. and Japanese central bank meetings. In the United States, the Federal Reserve's official calendar sets October 27 and 28, 2026, for the next Federal Open Market Committee meeting. That will be followed by the Bank of Japan meeting scheduled for October 29 and 30, according to the Japanese central bank's meeting schedule. The conclusion of the Japanese meeting on October 30 coincides with publication of the Bank's View section of the Outlook for Economic Activity and Prices report. October will thus see Japanese inflation data followed by the Federal Reserve meeting, then the Bank of Japan meeting and publication of its outlook for activity and prices.