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.
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 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.
Some investors have piled up their euro holdings rapidly this week, overreacting to the Fed minutes. This long-euro position won't last.
An increase in oil imports means more demand out of Japan for the dollar to buy them.
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.
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.
Should Fukui go further than his previous comments on a policy shift, that will likely be a yen-buying factor.
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.