The strong U.S. retail sales data for September, released last night, led traders to lower their expectations for a Federal Reserve rate cut. The yen subsequently broke through the 150 mark, with the dollar strengthening.

This morning, the yen edged higher against the dollar in the short term, following comments by Japanese Ministry of Finance official Jun Mimura on market volatility. As of press time, the dollar/yen was quoted at 150.

The yen had been falling for two consecutive weeks, as investors reassessed expectations for a narrowing of the U.S.-Japan interest rate differential.

Some strategists believe that the yen will further depreciate to within 150.

"The dollar is generally rising against the yen due to strong U.S. consumer confidence," said Skylar Montgomery Koning, a foreign exchange strategist at Barclays Bank in the United States.

"With strong economic data, the dovish pricing of the Federal Reserve has decreased, and the yen has performed poorly in the composite index."

Currently, swap trades for the Federal Reserve's January meeting indicate that there will be about 60 basis points of rate cuts over the next three Federal Reserve meetings, or slightly more than two 25 basis point cuts.

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The outlook for the yen is changing. New Prime Minister Shinzo Abe earlier this month stated that Japan is not yet ready to raise interest rates, and later he said he was seeking to align with the Bank of Japan.

In addition, other reports from the United States show that the U.S. economy has resilience, driving market expectations for the Federal Reserve to slow down rate cuts, which also puts pressure on the yen. The weakening of the yen is also affected by the recent rise in domestic and foreign stock prices. Some strategists believe that the yen will further depreciate to within 150.

Even so, according to data from the U.S. Commodity Futures Trading Commission for the week ending October 8, hedge funds' bullishness on the yen reached the highest level since early 2021.Mitsubishi UFJ Trust Bank's Head of Sales and Trading in New York, Takafumi Onodera, stated:

"If U.S. data continues to be strong, then the yen is very likely to reach 153 this month before the election and the FOMC meeting."

Nomura Securities' foreign exchange strategist, Yusuke Miyairi, noted that the prospect of Trump being elected as the President of the United States is another major risk for the yen:

"Aside from the Federal Reserve's policy path and U.S. data, a Trump victory could trigger an instinctive reaction in the dollar/yen, as the market might interpret his victory as bringing more inflation."