EBC Trading Market Report: US Tech Stock Plunge and the Battle for the 157 Yen Level After the BOJ Meeting
Previous Trading Day Summary
On the previous trading day, October 30, the dollar-yen pair fell from around 157.90 to a low of around 157.20 in the Tokyo market ahead of the Bank of Japan meeting. The BOJ decided to keep its policy interest rate at around 1.25% and increased the annual pace of selling its ETF holdings from approximately 330 billion yen to approximately 860 billion yen on a book-value basis. It also upwardly revised its inflation forecast for fiscal year 2027. Although the dollar-yen pair was sold down to the 157.10 level after the announcement, it was bought back in the afternoon. The Nikkei Stock Average closed at 63,290.11 yen, down 1,369.36 yen from the previous day.
In the London market, the dollar-yen pair briefly recovered to the 157.70 level following Governor Ueda’s press conference. However, after the Governor stated that the bank would examine the situation including at the next meeting, yen buying became dominant, and the pair fell to 156.96 yen, weighed down by a decline in US long-term interest rates and lower Nasdaq futures. The euro-dollar pair rebounded from around 1.1176 dollars in the London morning to the 1.1200 dollar level.
In the NY market, as selling of US tech stocks continued, the dollar-yen pair recovered from the 156 yen level to the mid-157 yen level to close. The OHLC for the 30th was: open 157.71 yen, high 157.90 yen, low 156.96 yen, and close 157.56 yen. The euro-dollar closed at 1.1160 dollars, and the euro-yen closed at 175.78 yen. US stocks saw the Dow average down 1.09%, the S&P 500 down 1.82%, and the Nasdaq Composite down 2.86%. Meanwhile, WTI crude oil for December delivery rose 2.08% to 104.12 dollars. The US 10-year Treasury yield was 4.929% at 5:27 AM Japan time on the 31st.
Assessing the Yen Market After the BOJ Amidst Falling Stocks and Rising Oil Prices
The BOJ kept interest rates unchanged but accelerated the pace of ETF sales and raised its inflation forecast. Meanwhile, in the US, tech stocks fell due to concerns over the profitability of AI investments. Coupled with rising oil prices, heavy factors are weighing on stocks. However, the dollar-yen pair recovered to 157.56 yen after falling to 156.96 yen on the 30th, so yen buying has not continued in one direction. We want to distinguish between the decline in Japanese stocks and US stocks, and confirm which way US interest rates and oil prices will move.
Today, China’s October Manufacturing PMI is scheduled to be announced at 10:45 AM Japan time. The US transitioned to winter time on November 1, and the October ISM Manufacturing Index is scheduled for 12:00 AM on the 3rd Japan time. Since the 3rd is Culture Day and the Japanese stock market will be closed, caution is also required regarding position adjustments before the long weekend in today’s Tokyo market.
Today’s Key Points
For the dollar-yen, we will use the previous trading day’s low of 156.96 yen and high of 157.90 yen as benchmarks. If it clearly falls below 156.96 yen and settles there, the low of 156.65 yen on the 26th is the next level to check. On the other hand, if it exceeds 157.90 yen, we want to verify from the movements of Tokyo stocks and the US 10-year Treasury yield whether the yen buying after the BOJ meeting has paused. We will also watch to see if rising oil prices intensify the decline in stocks.