Dollar Holds Above 160 Yen as Fed Policy Seen as Key Driver

Nomura Research Institute economist Takahide Kiuchi said the future path of U.S. Federal Reserve policy is likely to be the main driver of moves in the U.S. dollar against the Japanese yen, even after the Bank of Japan’s recent rate hike, with the dollar still staying above 160 yen. According to Jin10, Kiuchi said the Fed’s latest dot plot has not yet fully reflected the impact of a decline in oil prices following progress in U.S.-Iran talks. He said lower energy costs are expected to quickly push down U.S. retail gasoline prices, but the Fed’s policy trajectory will still mainly depend on trends in non-energy prices. Kiuchi added that if a Fed led by Kevin Warsh reduces its communication about future monetary policy and lowers transparency for financial markets, market volatility could intensify.