Should Fukui go further than his previous comments on a policy shift, that will likely be a yen-buying factor.
Money should flow into Japanese government bonds, including from foreign investors. It wouldn't be surprising for the recent rise in yen interest rates, which had been ignored by the market until now, to garner attention.
When interest rates increase, they have a capital loss. During a time of ECB rate increases, Japanese investors don't want to buy European bonds.
It is highly likely that the 2 trillion yen buying in August reflected the market's expectations that Koizumi's victory will support the stock market, and that foreign buying could take a respite this month.
Some investors have piled up their euro holdings rapidly this week, overreacting to the Fed minutes. This long-euro position won't last.
Most market players have already factored in another 25-basis point hike in the key federal fund rate in the FOMC meeting next month, but whether the Fed will keep raising rates in May depends on economic data, such as the CPI.
Expectations of further increases in U.S. interest rates are partly encouraging investors to take money out from Asian stocks. Fund outflows have been weighing on regional currencies.
The trend will be a stronger yen through to the end of this month. Strong stocks are drawing flows of overseas money into Japanese assets.
The stronger economic outlook is positive for the stock market and may encourage more fund inflows to Asian countries such as South Korea and Taiwan. Such flows are supporting the currencies.
Prospects for widening rate differentials between the U.S. and economies such as Japan and Europe helped the dollar this year and will continue to do so.
An increase in oil imports means more demand out of Japan for the dollar to buy them.
It seems that investors are beginning to think that rises in US interest rates may continue for longer than previously thought, and in line with this view they are likely to continue covering short dollar positions in the near-term.
Investors increasingly fear that the US Fed will soon end its rate hike policy, which will keep the dollar in a weak tone against other major currencies.
The dollar-yen will trade in a range of 117-119 yen if the GDP data is in line with the market forecast.
The comment suggests the possibility they will raise rates further, supporting the peso. They will maintain the advantage of higher rates.
The concern is that the protest will lead to violence, which will hinder the government's efforts to cut subsidies and the budget gap. That is weighing on the currency.
The market has already priced in another interest rate hike in March so the dollar's scope for further gains on rate hike expectations is limited.
The market has already priced in another interest rate hike in March, so the dollar's scope for further gains on rate hike expectations is limited.
