Signs of Renewed Dollar Strength: Targeting Dollar Selling Adjustments While Watching FOMC Minutes

Signs of Renewed Dollar Strength: Targeting Dollar Selling Adjustments While Watching FOMC Minutes

In today's Tokyo market, the USD/JPY has risen to the upper 148 yen range. This increase follows reports that China will hold a fiscal policy briefing on the 12th, reigniting expectations for a recovery in the real estate market. A risk appetite is spreading, leading to a reduction in the decline of Shanghai stocks, while Hong Kong stocks have returned to positive territory. Consequently, the USD/JPY is being pushed higher, resulting in yen depreciation.

On the other hand, the dollar's decline due to risk preference remains limited, with the dollar index showing solid movements. The New Zealand dollar has plummeted, primarily due to a significant 0.50% rate cut by the Reserve Bank of New Zealand and rising expectations for further rate cuts. The euro is also weakening against the dollar as rate cut expectations for the ECB's upcoming meeting this month have increased.

FOMC Minutes and Dollar Developments

Later today, the FOMC minutes from the meeting held on September 17-18 will be released in the New York market. At that time, Fed Chair Powell expressed a cautious stance on rate cuts; thus, if the minutes confirm a cautious outlook on additional rate cuts, the dollar buying may resume. However, since the minutes were recorded before the strong US employment data was released, any dovish content included may have limited market impact.

Trading Strategy

Recognizing that there has been a significant buildup of dollar buying, I plan to target dollar selling adjustments moving forward. In particular, I will look for opportunities to sell the dollar by utilizing the adjustment phase leading up to the US Consumer Price Index (CPI) release on the 10th, while monitoring market reactions following the FOMC minutes.