Mixed Fed Signals Keep USD/JPY Momentum in Check Near 156.50

USD/JPY is trading with modest upside momentum hovering near 156.50 in early Monday trading across Asia. The pair’s directional bias hinges on conflicting cues from Washington policymakers, even as Tokyo officials continue warning about currency intervention.

Fed Divided on Rate Trajectory Supports Dollar Gains

The Federal Reserve is sending mixed messages that traders need to parse carefully. Boston Fed President Susan Collins indicated that current monetary policy “sits in the right place,” suggesting no immediate shift is warranted. Meanwhile, Dallas Fed President Lorie Logan advocated for holding rates “for a time” to assess their broader economic footprint. These more measured comments contrast with earlier dovish expectations and lend some near-term support to the Greenback.

Adding to the complexity, October’s Fed minutes revealed that numerous policymakers lean toward maintaining steady rates through December, rather than cutting further. This hawkish lean should theoretically bolster USD strength against yen weakness. Yet New York Fed President John Williams threw a counterweight into the equation on Friday, noting that rate cuts remain feasible “in the near term” without derailing the inflation mandate—a statement that could temper dollar enthusiasm.

Inflation Data and BoJ Rate Expectations Cloud the Picture

Traders are bracing for the US September Producer Price Index data dropping later this week, which will serve as a critical input for assessing inflation persistence. Any hotter-than-expected print could reinforce the case for holding rates longer, benefiting the USD.

Japan’s policy side remains equally fluid. The Bank of Japan has maintained rates at 0.5% since January, but Governor Kazuo Ueda has telegraphed potential action in December or early January. A Reuters survey indicated that most economists project a December hike to 0.75%, though market consensus had previously tilted toward a January move. A timelier BoJ tightening would narrow the USD/JPY carry appeal and pose a ceiling on dollar gains.

FX Intervention Risk Caps Upside Potential

Japanese Finance Minister Satsuki Katayama reiterated on Friday that verbal and potentially actual intervention remains “a possibility” to combat excessive volatility and speculative yen weakness. This warning puts a tangible lid on how far USD/JPY can rally before official pushback emerges, making 156.50 and beyond a contested zone rather than a springboard for further upside acceleration.